Gold Hits Slide, Bitcoin Surges Ahead
Bitcoin surpasses gold's scarcity, according to Binance CEO CZ's claim.
In a Twitterpost that caused a stir in the investment world, Binance founder, Changpeng Zhao, questioned gold's value as compared to Bitcoin. Zhao, popularly known as CZ, stated, "I'm not against gold, but it's not a scarce asset like Bitcoin." This comment came as gold hit a record high of $3,500.50 on April 22, only to tumble down 2.6% by the week's end to $3,228.50.
The drop in gold price can be attributed to a variety of factors, such as soaring U.S. Treasury yields and easing trade tensions between the U.S. and China. The latter weakened the demand for safe-haven assets like gold. According to Daniel Pavilonis of RJO Futures, the gold market might have peaked at $3,500.
CZ Sheds Light on the Scarcity Factor
In his post, CZ stressed the difference between Bitcoin's fixed supply and gold's increasing supply. This is particularly significant in light of inflation concerns and central bank policies. Unlike gold, which is a physically minable commodity, Bitcoin has a capped supply of only 21 million units—a feature that provides it with characteristics of a scarce asset.
Peter Schiff, known for his criticisms of Bitcoin, remained unyielding, tweeting, "Bitcoin hasn't left the NASDAQ, it's still acting like tech stocks. Gold is what you buy to protect from inflation." Schiff argued that falling bond prices and a weakening dollar would lead to increased borrowing costs, impacting the market.
Sync Lost: Bitcoin and Gold Diverge
In March 2025, the correlation between Bitcoin and gold dropped to its lowest level since 2020: -0.42. This marked a significant break in their longstanding relationship, which saw them moving in tandem since 2020-2024. Although the correlation improved slightly to -0.28 in April, the two assets are now moving independently.
Geoff Kendrick, Global Head of Digital Assets at Standard Chartered, believes that Bitcoin is not meant to replace gold but acts more like tech stocks. He suggests viewing Bitcoin as a tech investment that offers protection against traditional financial risks.
Despite the diverging paths of gold and Bitcoin, market conditions could potentially bring them together. However, CZ maintains that true scarcity is a characteristic unique to Bitcoin.
Sources: CNBC, Bloomberg, Reuters
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Insights:
- Gold Supply: Gold is a physical commodity that can theoretically see new supply added through mining. Although gold's supply is vast, new discoveries and extraction can add to it.
- Bitcoin Supply: Bitcoin, in contrast, has a capped supply of 21 million units which theoretically protects it from inflationary pressures associated with an increasing supply.
- Market Implications: The scarcity of Bitcoin contributes to its appeal as a store of value and hedge against inflation, especially during economic uncertainty and global monetary expansion.
- Price Volatility: Bitcoin's price can be highly volatile due to its speculative nature and the factors influencing investor sentiment.
- Comparison Between Gold and Bitcoin: While gold remains the largest asset class with a market capitalization of over $21.7 trillion, Bitcoin's market cap is significantly lower at around $1.9 trillion. However, predictions suggest Bitcoin could grow significantly, with some analysts projecting it to reach $1 million by 2029, potentially rivaling gold's market dominance.
- In Q1 of 2025, the correlation between gold and Bitcoin dropped to its lowest level since 2020, marking a significant shift in their traditional relationship, with Bitcoin demonstrating characteristics akin to tech stocks.
- Unlike gold, Bitcoin's supply, capped at 21 million units, renders it a scarce asset, offering protection against inflation and traditional financial risks.
- In response to Gold's historic slide and Bitcoin's surge in April, Binance CEO, Changpeng Zhao (CZ), reinforced the unique scarcity of Bitcoin as compared to gold, emphasizing the digital asset's potential to compete with gold in the long term.
