Fidelity's pension fund, an investment company, will reduce its gold holdings by 5% and allocate the funds to invest in Bitcoin.

According to a report by Business Standard, Christopher Wood, the global equity strategist at investment firm Jefferies, is adjusting the long-term investment portfolio of the pension funds under his management. He is reducing the gold allocation from 50% to 45% and allocating the remaining 5% to invest in Bitcoin.

5% of Long-Term Investment Portfolio Allocated to Bitcoin

Fidelity, a global investment bank headquartered in New York with approximately $51 billion in assets under management, stated that:

"The 50% allocation of gold in the portfolio will undergo its first reduction in many years, approximately 5%, and these funds will be used to invest in Bitcoin. If Bitcoin experiences a significant pullback from current price levels after surpassing the $20,000 milestone, further increasing the Bitcoin holdings will be considered."

However, Christopher Wood emphasized that reducing gold holdings does not signify a bearish view on gold. On the contrary, he believes that if the U.S. government continues with quantitative easing, the price of gold should still see further upside from current levels.

"This does not mean 'GREED & fear' (Christopher Wood's blog) will abandon gold. Facing a cyclical financial recovery under the pandemic, if the Fed continues its dovish stance, gold prices should rise again."

Apart from 45% gold and 5% Bitcoin, the rest of the assets allocation for this pension fund includes a 30% weight in Asian (excluding Japan) stocks and a 20% weight in non-hedged gold mining stocks.

Bitcoin's Appreciation Potential Surpasses Gold

It is evident that as Bitcoin's price rises, confidence in its macroeconomic hedge grows stronger. Many financial institutions are choosing to reduce their gold holdings and allocate funds to Bitcoin. Ruffer Investment Co Ltd, a traditional financial investment institution based in the UK, announced to its shareholders on December 15th that after reducing its gold holdings in November, 2.5% of its assets allocation has been invested in Bitcoin. Given the size of Ruffer's fund assets, this amounts to at least a $15 million investment.

Weiss Rating analysts Juan Villaverde and Bruce Ng stated that due to the rapid growth of the global bond market over the past decades, coupled with crises triggered by excessive money printing, the traditional "70% stocks, 30% bonds" asset allocation has become ineffective, as bonds no longer serve as effective hedges for pension funds and other large investment firms. In such a scenario, if more institutions begin to shift assets from bonds to commodities like Bitcoin and gold, Bitcoin could have significant upside potential.

"There are approximately $30 trillion in government bonds globally. Assuming 10% of these flow into gold and Bitcoin, this would mean about $3 trillion exiting the bond market. If evenly distributed, around $1.5 trillion would flow into the gold market, representing 15% of the gold market cap, and another $1.5 trillion into Bitcoin, which is 4.4 times the Bitcoin market cap at the time of writing this article, previously 3.4 times."

Due to Bitcoin's significantly lower market value and trading volume compared to gold, with the influx of bond investors, Bitcoin's growth potential could far surpass that of gold.