Bitcoin is eating into gold

As we all know, since the US SEC approved the Bitcoin spot ETF to enter the US stock market, it has opened the door for the overflowing liquidity of the US financial market to flow into Bitcoin. In just 30 trading days, the Bitcoin ETF has expanded from zero to nearly 40 billion US dollars, exceeding the scale of the silver ETF by about 10 billion US dollars, and temporarily forming a "30-70" pattern with the gold ETF with a scale of about 90 billion US dollars.

The massive injection of US dollar liquidity has kept the price of Bitcoin at 52k. Bitcoin spot ETF has thus become the fastest growing ETF in the history of Wall Street. (See Liu Jiaolian's article on February 11, 2024, "US Bitcoin ETF holdings exceed 200,000 BTC, becoming the most popular ETF in the history of Wall Street!")

So, where does the liquidity flowing into the Bitcoin ETF come from?

Data shows that most likely half of it came from the loss of liquidity in gold ETFs.

As can be seen from the chart, since the Bitcoin spot ETF was listed in January, the cumulative net inflow of the ten Bitcoin ETFs has reached about US$4 billion. During the same period, the 14 top gold ETFs have lost more than US$2 billion in liquidity.

Of course, if we extend our vision to 2023 and broaden it to related ETFs around the world, we can see that the accelerated outflow of gold ETFs has been unstoppable since mid-2023.

This ironclad fact undoubtedly confirms a statement we have already repeated many times: Bitcoin is better gold.

As early as February 22, 2020, Jiaolian talked about:

“The entire process of monetization of a commodity generally goes through several stages: (1) collectibles; (2) speculative products; (3) storage of value (SoV); (4) medium of exchange (MoE); (5) unit of account.

“It took gold thousands of years to complete the above process. The monetization of Bitcoin may be a great monetization process that our generation can witness in their lifetime (maybe we won’t live long enough for the process to be fully completed).

“In the past decade, Bitcoin has gone through the first two stages, driven by idealists and fanatical speculators respectively. Starting from the first half of 2019, Bitcoin has officially entered the third stage.”

Obviously, although the teaching chain has repeatedly said that the ultimate mission of Bitcoin is to defeat the US dollar, before that, or in other words, at the current stage, its historical mission is to first defeat and surpass gold. The reason is nothing else, just because of the objective laws of the monetization process mentioned above. Bitcoin must first defeat stocks at the speculative level, and then defeat gold at the value storage level, before it can enter the next stage and challenge the global status of the US dollar as the king of currencies as a medium of transaction and unit of account.

Currently, Bitcoin has just crossed the $1 trillion mark in total market value, while the global total market value of gold is nearly $14 trillion.

Jiaolian wrote in December 2022:

“As mentioned before, the crypto industry cycle is still driven by Bitcoin. In other words, it is driven by the incremental funds and leveraged funds brought by Bitcoin. It is Bitcoin that drives the bull market and creates hot spots, rather than hot spots driving the bull market and creating Bitcoin.

“Today, the price of Bitcoin at 16k-17k may be roughly equivalent to $230 at the end of 2015, or $5,000 below the “312” circuit breaker low in 2020. Maybe next, Bitcoin will either go through a slow and arduous climbing and repair process like in 2015-2016, or experience the bottom-out shock market like in 2019. But in any case, before the (estimated) Bitcoin production is halved again on April 20, 2024 (from 6.25 to 3.125), the entire market should still be repairing the trauma caused by various explosions during the 2022 downturn, and it is unlikely to set new highs in the short term.

“By the end of 2023, we may see Bitcoin at no less than 25k and no more than 69k (previous high). Before the end of 2024, Bitcoin is expected to rise back to the $40,000-$100,000 range. If we can usher in the next big bubble of the bull market around 2025, we may have the opportunity to see Bitcoin quickly break through below $100,000 and challenge the cycle ceiling of $400,000-500,000 with unstoppable force.

"At the peak of the bull market bubble in 2021, Bitcoin's market value once ranked among the top ten assets in the world, comparable to the market value of the top U.S. companies. At the same time, Bitcoin also showed a strong correlation with the trend of U.S. stocks. If the 2021 cycle is defined as a challenge to the U.S. stock market, the 2024-2025 bull market cycle will challenge the world's top asset class - gold.

“Today, the total market value of gold is about $12 trillion. At a price of $17k, Bitcoin’s market value is about $330 billion, which is 36 times the total market value of gold. The total number of Bitcoins today is 19.22 million. It is estimated that about 660,000 will be produced in 2023-2024. The total number reaches 19.88 million. Based on the approximate number of 20 million, the market value reaches $12 trillion, and the unit price should be $600,000 per Bitcoin.

“In the last bear market, the bottom was over 3,000 at the end of 2018 and the top of the bull market was 69k at the end of 2021, an increase of about 23 times. According to the current price of 17k, a 23-fold increase is 390,000 or about 400,000 US dollars per bitcoin. Multiplying by 20 million, the total market value is 8 trillion US dollars, which is about 67% of the market value of gold of 12 trillion US dollars.

“Even if the increase is smaller, such as 17 or 18 times, reaching $300,000 per Bitcoin, the total market value is $6 trillion, about half of gold. Even if it does not exceed the market value of gold, it can be said to be on par with gold if it reaches a similar order of magnitude.

“If the market value of Bitcoin accounts for 30-50% of the entire crytpo industry by then, it can be inferred that the total market value of the crypto industry will be expected to reach about 12-20 trillion US dollars. This figure is about 13-22 times today’s 870 billion US dollars.

“Whoever can get a piece of this $12-20 trillion market value will be the lucky one to reap the dividends in the next bull market cycle.”

Looking back at 2023 today, the original judgment has been basically confirmed. The unexpected early approval of the Bitcoin spot ETF in early 2024 brought a surge of incremental funds to Bitcoin.

Bitcoin lived up to expectations and quickly launched an attack on gold, which stood in the same ecological niche, quickly eroding the latter's market and proving that it is indeed the "better gold" in everyone's mind and a better store of value (SoV).

BlackRock, a financial "upstart", also used the Bitcoin ETF to quietly challenge JP Morgan, the global gold trader.

Bitcoin versus gold, the new rich versus old money. The charge to launch a general attack on gold has been sounded. Once the horn is blown, Loulan will be conquered!