According to Changpeng Zhao, a duel between bitcoin and gold would turn to the advantage of crypto from the next bull market. The founder of Binance considers this excess possible, however recent valuations temper his prediction.
In brief
- CZ predicts that bitcoin will overtake gold in the next bull market.
- The gap remains massive: gold is still worth more than 18 times the capitalization of bitcoin.
- BTC is expected to reach nearly $1.56 million to compete with the gold market.
- The adoption of bitcoin by States could accelerate this rapprochement.
- The correlation between bitcoin and gold is increasing, while that with the Nasdaq 100 is declining.
CZ bets on the next bull market
While Sarah Sacrispeyre believes that the best years are yet to come, Changpeng Zhao announced her projection during the Bitcoin Asia conference. He believes that the capitalization of bitcoin would soon exceed the total value of the gold market.
According to the remarks reportedhe indicated: “I think bitcoin will overtake gold fairly soon”. However, CZ has not communicated any precise date for this changeover.
His theory is based on four main arguments:
- The valuation gap between the two assets would have narrowed;
- A new bull market could accelerate the catch-up;
- National strategic reserves would strengthen demand;
- CZ considers it unlikely that another asset will replace bitcoin.
The founder of Binance believes that states would play a leading role. He therefore asserts: “if bitcoin becomes a strategic reserve asset for nations, will it become more important than gold? Certainly “.
Governments already have systems designed for the custody, valuation and exchange of gold. Thus, the design of comparable infrastructures around bitcoin could take several years. CZ recognizes this delay, however he considers this transition inevitable.
He adds: “this change will take time, but it will happen”. For him, bitcoin is also a better asset than gold, without detailing the criteria used for such a comparison.
The actual gap still exceeds a ratio of ten
CZ believes that the value of gold remains nearly ten times that of bitcoin. The statistics available at the time of his declaration, however, indicate a larger gap.
In fact, bitcoin is currently trading around $79,000. With 20.08 million tokens in circulation, its capitalization was around nearly 1590 billion dollars.
THE World Gold Council estimated, for its part, the 222,600 tonnes of gold already extracted at 29,000 billion dollars at the end of June. On this basis, the gold market was more than 18 times the valuation of bitcoin.
The price of gold has since evolved. It rose around 4,385 dollars per ounce on September 9, against the price set by the World Gold Council at the end of the second quarter. An update could place the theoretical value of the global stock close to $31 trillion.
To achieve such capitalization, each bitcoin in circulation would have to be worth nearly $1.56 million. This could represent an increase close to 1870% from the price of $79,000.
Businessman Ricardo Salinas Pliego even mentions a price of 1.86 million dollars. Such a gap depends on the volume of gold retained, its price and the number of bitcoins included in this calculation.
This comparison remains theoretical. The value of gold includes jewelry, central bank reserves, bars, coins and industrial uses. As for the capitalization of bitcoin, it is based exclusively on its latest price multiplied by its circulating supply.
Bitcoin’s correlation with gold is increasing
This relationship between bitcoin and gold goes beyond a comparison of capitalizations. The behavior of the two assets in the markets is also starting to get closer.
Thus, the 90-day correlation between bitcoin and gold would have reached 0.57, compared to 0.21 in March. At the same time, the correlation with the Nasdaq 100 would have increased from 0.57 to 0.22.
A positive correlation signals that assets often move in the same direction. However, it does not prove that bitcoin already has the safe-haven status of gold. This relationship can quickly disappear during a financial shock.
Central banks owned nearly 39,000 tonnes of gold at the end of June, valued at $5,000 billion. Regarding their exposure to bitcoin, it remains very low in comparison, despite the strategic reserve projects adopted by certain countries.
The prediction of CZ therefore depends on two major movements. Thus, bitcoin will have to experience a historic rise, while governments will have to accelerate its integration into their reserves. In the absence of these two conditions, the overtaking of gold in the next bull market will remain highly speculative.
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