Dollar is not enough to look at! Value storage funds are in rotation, Bitcoin against gold hits a new all-time high

2020 has come to a close this week. Looking back at the year, many financial institutions and traditional investors have changed their views on Bitcoin, seeing it as a digital gold and even a better store of value than gold. But what data can prove that the market is moving in this direction?

Bitcoin Hits Historic High Against Gold

Bitcoin has once again quietly surpassed its historic high, but this time not against the depreciating U.S. dollar due to inflation, but against the global store of value, "gold." According to data from MarketWatch, on December 31st, as Bitcoin (BTC) broke through $29,000, the value of one Bitcoin was equivalent to 15.40 troy ounces of gold, exceeding the peak set in December 2017 (15.19 troy ounces).

It is worth mentioning that Bitcoin continues to rise and keeps breaking historical highs against gold valuation. At the time of writing, one Bitcoin can be exchanged for 15.65 troy ounces.

Market Fund Rotation

In 2020, Bitcoin can be said to be the best-performing asset class. Gold rose by 25% from the beginning to the end of the year, surpassing the S&P 500's 16%, while Bitcoin was a stunning 320%. Furthermore, unlike the bull markets experienced in the past 11 years, last year's rise was largely driven by favorable factors adopted by institutions.

More and more Bitcoin supporters believe that due to better asset efficiency, transferability, and proven scarcity, digital currencies are eroding the market value of gold. Some analysts even claim that part of Bitcoin's rise in 2020 comes from outflowing funds from gold. Even analysts at traditional financial giant JPMorgan Chase hold the same view. According to previous reports, analysts at JPMorgan Chase released a report in early December claiming that the flow of funds into Grayscale sharply contrasts with the gold market. The analysts wrote in the report:

"Over the past five weeks, the most impressive flow of funds into Grayscale's Bitcoin Trust sharply contrasts with the outflow from gold ETFs since mid-October."

The analysts added that this contrast seems to indicate that some investors who previously invested in gold ETFs, such as family offices, may be considering Bitcoin as an alternative to gold. For example, investment firm Fidelity announced in December last year that its pension fund would reduce its gold holdings by 5% and allocate it to Bitcoin. As confidence in Bitcoin grows, more funds are flowing from gold to Bitcoin.