May 13, 2024

ZX Squared Capital co-founder and CIO CK (Changguang) Zheng discusses why institutional interest in bitcoin led by the ETF products in the U.S. could be the catalyst for the largest crypto by market cap to reach the $90,000 level by the end of 2024.

Video transcript

End of the year, Bitcoin price will hit the 90,000 based on our uh adjustment model. But you know, during periods of noise, I think a lot of volatility obviously depends the demand supply as well as the adoption process. Good morning, everyone. Welcome to Markets Daily. I'm your host, Helene Braun. It's Monday May 13th 2024. And so far, it's looking pretty mixed across the board in terms of prices this morning, about nine out of 20 assets in the coins 20 index are trading higher though including Bitcoin, which is up by about 2.6% trading at $62,710. Ether is also trading higher at $2964 up by about 1.3%. Some things to be on the lookout for this week, perhaps the most relevant for crypto markets are the 13 F filings that are due on Wednesday and should give us more insight into who holds the spot. Bitcoin ETF S and who doesn't. More importantly. Also out on Wednesday is a fresh CP I report or inflation report here in the US which forecasters expect that inflation rose 3.4% year over year and 0.4% month over month. So still seeing some pressure on that front as well. But we'll talk about how the report could impact Bitcoin and the rest of the market with our guests. So let's bring him in. Joining us today is CK Zheng co-founder and CIO of ZX Squared Capital. Good morning. Good morning. Thank you for helping me. Of course. Thanks so much for being here. ZK. We start off every show asking about a prediction. This could be for today for this week or for this year or even long term. So what's your call of the day today? Well, I mean day to day is very noisy. I think it's a lot of noise coming go. Um We look at we actually, if the hedge fund using an option strategy, look at a much more longer term or media term. If you will um our core for the end of the year, Bitcoin price will hit the 90,000 based on our uh adjustment model. But the, you know, during periods of noise, I think a lot of volatility obviously depends on demand supply as well as the adoption process. So if you say 90,000 at the end of the year, what are some of the catalysts that you think will push the price higher in the next couple of months? Well, I think the key actually is the ETF Uh I think the Bitcoin uh ETF is great. Uh I think it brings a lot of uh institution investors and the people historically had a trouble uh or had a concern to invest in the, at the club. Um I think the, the, this cycle, I think are very different than previous cycle. I think the ETF would clearly get the people more comfortable. I think the question right now when I talked to many of my uh friends in the traditional finance space, uh which I, I work in the traditional finance for over 30 years. Uh uh really is why I'm investing Bitcoin. And that question I got asked, but, you know, again and again, every time I meet the people, um and it's, again, it's still early adoption stage. I mean, it's only 3% of 4% of the population right now. Uh actually own some of, of the crypto I think the adoption from today to the, you know, 15% of the world population, own of Bitcoin or other cryptos to the early majority stage will take a time. I think maybe next 10 years or so, that's the process will get people excited. And I think, you know, people always thought about the Bitcoin at the early days, maybe a scam. And, you know, I'm one of them at the early days from a Wall Street perspective are really concerned about how Bitcoin stay here for long term today. That question, I think it's much less relevant. So what, what changed your mind? I think there's a multiple things. One is, I think the network effect, I think when, when network is small, it's questionable when network actually reach 200 million people, that's pretty sizeable population. And that the network effect, uh, really follow the, um, medical law that the value of the system is the proportion to the square of the size of network. And when I get my hedge fund running three years ago, I saw the volume uh and not only that the financial product actually become mature. Uh not only the future, but the more importantly, the option market. So when Bitcoin option actually becoming a phenomena and more and more people get involved, the Bitcoin option vol uh uh in space right now, I mean, basically option trading in the record of the record of trade in value. Um So I think that's very, very promising and the narrative of Bitcoin is never better than before because to me, if people think about long term, I mean, the fiat currency right now, disaster, right? Every country print the money. So think about Bitcoin as the ori original form is really think about when the financial, you know crisis of O A hit us government to print the money, trillions of trillions uh when COVID hit the market. Well, you know what the government print three more times of money and all of a sudden right now the US government right now, the debt is reached 30 trillion and interest rate annually will pay more than trillion that's not really sustainable. And not only the US government, I mean, pretty much every major uh central bank print the money. That's one thing, I mean, the other thing is the geopolitical situation right now is clearly uh troublesome and in the normal of the trouble in the world, people hold the real value of real asset. And I think a Bitcoin right now is really becoming di it for gold if you will. So speaking of interest rates, I want to get your thoughts on the short term outlook specifically for this week, which is a pretty big week for crypto markets in the US. What do you expect from the rest of the week? As I just mentioned, I'm seeing a mix of red and green across all assets, but Bitcoin and Ethereum are both up. Is this a result or is this an anticipation of the CP I report that's coming in this week or what else are you watching? Well, Bitcoin, I mean, in some ways uh impacted by interest rate in a way, but in long term, it's not correlated with other, other class, right? Uh even though today Bitcoin you can think about digit go, but still there are quite a amount of un the day in the adoption early stage. So there's a certain amount of correlation with the other high tech stock, for example, but that's kind of near term. So I think the interest rate and the and the inflation and near term, you know, make a noise. But every time when market fell off in Bitcoin, it's great entrance point to get into. Uh and, and that's because the long term narrative uh phenomenon. So I think the people need uh uh a risk tolerance to ensure that you get in early on in Bitcoin is a long term investment. My colleague this morning reported that if Bitcoin drops below the $60,000 mark, which currently, I think we're around 62,000, but that could trigger a panic sale among investors. Do you agree with that? And why, why or why not? Uh I think it's not gonna be panic, the panic to people who are not believer and I think it will be great news for people actually believe a long term. So I think it's uh uh I think it's the, it's the kind of a people's uh commitment to Bitcoin and that's back to my early time in can talk about the uh uh the narrative and the the of Bitcoin. And if you truly believe the fiat currency and geopolitical issue will have a long term last effect for the financial system. Bitcoin is today the best at the class, not only last 10 years, probably for next next 10 years. And uh what I believe is today, it's the near term demand supply issue, driving the Bitcoin price because after happening, because many of the miner probably fought to sell some of their reserve Bitcoin reserve to make sure they pay the spend. Given the Bitcoin. Right now, the mining cost is getting higher and higher. Uh you know, average probably right now in north of 50,000, even in some of some of the most efficient miner probably will uh cost 40,000 more. So that's why I think the selling pressure uh from minor is one but also some of the other like FTX liquidation, obviously impact of some of the supply uh of Bitcoin um and crypto. But I think uh the adoption of the ETF uh at the early days, the first two or three months at the beginning of the year was great. I think that you could start uh last uh you know, 3 to 4 weeks or so. Uh I think that's the, the thing is critical for us to look into it. I think it may take some time for the adoption because right now, even the ETF, Bitcoin ETF, you know, the size wide is pretty sizable. It's already a um about 50 billion of those then that influence about 12 billion. So the phenomenon and it's very, very successful this year already. I think a lot of people right now is waiting for Bitcoin price to go lower to jumping. So when you know, when the Bitcoin price hit the 55,000, uh about, you know, a week or so ago. I said that's a lot of people are going to jump in and, and they did. So today, if I look at the bit price, you know, 55 is something the matter of interest getting people still waiting to get entry, good entry point. But I think that people should not wait for long because I think given, if you look at the price, people actually, you know, talk about price like the why it cost so much, you know, 60,000 or so. I'd say that's irrelevant in a way because that price is just nominal price. You know, if you compare this price to previous cycle high of last cycle of 68,000, today's price, you know, post happening, it's almost equivalent of, you know, half of the price. So you know, 62,000 today, it's almost like a 31,000, you know, two or three years ago in a similar comparison. So people cannot look at at the dollar term. People look at the adoption process before and after happening, right? We'll have to wrap it here at CK. But thank you so much for joining us this morning. Thank you very much. That was CK Zheng co-founder and Cio of ZX Squared Capital. Thanks for tuning into today's show. I'm Helene Bra and I'll be back tomorrow with a new episode. I hope you have a great week.

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