CZ Bets On Bitcoin Overtaking Gold In The Next Bull Cycle

According to Changpeng Zhao, a bitcoin duel against gold would turn in favor of crypto as early as the next bull market. The founder of Binance considers this surpassing possible, however recent valuations temper his forecast.

CZ bets on the next bull market

While Sarah Sacrispeyre believes the best years are ahead, Changpeng Zhao announced his projection during the Bitcoin Asia conference. He thinks that bitcoin’s market capitalization would soon surpass the total gold market value.

According to reported statements, he said: “I think bitcoin will surpass gold pretty soon”. However, CZ did not provide any specific date for this shift.

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 thinks that states would play a leading role. He therefore says: “if bitcoin becomes a strategic reserve asset for nations, will it become more important than gold? Certainly”.

Governments already have systems designed for the storage, valuation, and trading of gold. Thus, designing comparable infrastructures around bitcoin could take several years. CZ acknowledges this delay, nevertheless he considers this transition as inevitable.

He adds: “this change will take time, but it will happen”. For him, bitcoin is as good an asset as gold, without detailing the criteria used for such a comparison.

The actual gap still exceeds a factor of ten

CZ thinks that gold’s value remains nearly ten times higher than bitcoin’s. However, statistics available at the time of his statement indicate a larger gap.

Indeed, bitcoin is currently trading around 79,000 dollars. With 20.08 million tokens in circulation, its market capitalization was close to 1,590 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. Based on this, the gold market represented more than 18 times bitcoin’s valuation.

Gold’s price has since evolved. It was trading around 4,385 dollars per ounce on September 9, compared to the price used by the World Gold Council at the end of the second quarter. An update could place the theoretical value of the global stock near 31,000 billion dollars.

To reach such a capitalization, each bitcoin in circulation should be worth nearly 1.56 million dollars. This could represent an increase close to 1,870% compared to the 79,000-dollar price.

Businessman Ricardo Salinas Pliego even mentions a price of 1.86 million dollars. Such a gap depends on the volume of gold considered, its price, and the number of bitcoins included in this calculation.

This comparison remains theoretical. Gold’s value includes jewelry, central bank reserves, bullion, coins, and industrial uses. As for bitcoin’s capitalization, it is based exclusively on its last price multiplied by its circulating supply.

Bitcoin’s correlation with gold is increasing

This relation between bitcoin and gold goes beyond market capitalization comparison. The behavior of the two assets in markets is also beginning to converge.

Thus, the 90-day correlation between bitcoin and gold has reached 0.57, compared to 0.21 in March. At the same time, the correlation with Nasdaq 100 would have dropped from 0.57 to 0.22.

A positive correlation indicates that assets often move in the same direction. However, it does not prove that bitcoin already holds gold’s safe haven status. This relationship can quickly disappear during a financial shock.

Central banks held nearly 39,000 tonnes of gold at the end of June, valued at 5,000 billion dollars. Regarding their exposure to bitcoin, it remains very low in comparison, despite strategic reserve plans adopted by some countries.

CZ’s prediction therefore depends on two major movements. Hence, 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, surpassing gold as early as the next bull market will remain highly speculative.