Analysts have been following these assets for some time now. In their opinion, it not an either-or dilemma. Most of the experts advise that investors should own both of them since they have massive potential for growth.
Silver and bitcoin remain quite undervalued even as the market fundamentals for both of them remain extremely bullish. Just like bitcoin, silver experiences massive rallies. Any participation in them is quite lucrative. But, it is important to review the outlook for bitcoin and then identify the parallels to understand better what may lie in store for the industrial metal.
The Bitcoin Case
Arising from its simple 2009 origins after the devastating 2008-2009 financial crisis, bitcoin has come a long way. It has risen exponentially in value since its early days and its current influence is undeniable and inevitable.
Taking into the context that the United States Federal Chair Jerome Powell recently commented on the rise of central bank digital currencies (CBDCs). He was speaking to an IMF-hosted digital payments panel where he said that 80% of central banks throughout the world are exploring the issuance of CBDCs. He added:
“We do think it’s more important to get it right than to be first and getting it right means that we not only look at the potential benefits of a CBDC, but also the potential risks, and also recognize the important trade-offs that have to be thought through carefully.”
In the issue of being the first, Powell was probably responding to China’s head start, where the Asian nation is already testing in several cities. China plans to launch its digital currency before the end of the year. Christine Lagarde, the European Central Bank president, also said that ECB is quite seriously reviewing the development of a digital euro.
Digital versions of the fiat currencies mean that it will be easier to create more and control them extensively. That hypothesis lends more credibility to bitcoin. Over the last few years, investors have discovered that bitcoin cannot be inflated or controlled and it has a limited total number of coins to be mined which is 21 million. Naturally, they will be attracted to the superior alternative.
That explains why bitcoin is increasingly getting recognized as a haven asset, especially during these health crisis times. It is currently more available to the general public via an increasing number of crypto exchanges. It has also gained distribution via payment processors like Square, which recently acquired $50 million worth of Bitcoin and PayPal.
The cryptocurrency is also accepted as a payment method by big retailers including Starbucks, Microsoft, and Whole Foods, as the list keeps growing. Bitcoin ownership is growing as well. Notably, the total number of bitcoin addresses that have a balance of at least $1,000 hit a new all-time high recently.
JPMorgan has been on record saying that it expects bitcoin to grow in popularity over time with more adoption from the millennials. Interestingly, Kanye West reiterated his passionate support for alternative currencies including Bitcoin.
A lot of what has been highlighted about bitcoin is also true for silver. The metal is not easily produced, and its supply is limited. Thus, many see it as money and a lucrative investment opportunity that makes it a haven asset. Moreover, it cannot be inflated.
Just like bitcoin, silver also experiences some major rallies which may lead to handsome payoffs for the investors.
Several things are different between bitcoin and silver. First, the ‘elites’ do not pay a lot of attention to silver. It is available, it is very cheap, and it is a small market. Also, unlike bitcoin, the supply of silver is not limited. Notably, only 28.7% of new silver supply arises from primary silver mines. 71% of the newly mined silver is produced as a by-product of other metals like lead, gold, copper, and zinc.
Therefore, a huge chunk of the newly mined silver is not driven by its price. If silver prices rise steeply, it does not indicate that there is more production.
Here is an interesting comparison. Steve St. Angelo of the SRSrocco Report said that all the gold investment globally is worth around $2.93 trillion while all mined bitcoin so far is worth about $240 billion. On the other hand, the total investment in the silver market is worth around $52 billion.
Experts do not aim to pit silver against bitcoin. But, they aim to point out the similarities and opportunities that these assets offer in the long term. Investors are advised not to look at these options as mutually exclusive. On the contrary, they should aim to own both bitcoin and silver.
These assets might be volatile, but they present a wild secular bull market ahead of them. That characteristic is quite important than all differences that may exist.