Bitcoin is frequently symbolized as a gold colored token, as shown in the image above. Ethereum, the world’s second largest cryptocurrency (by market capitalization), is sometimes depicted as a silver token. It’s no coincidence that the two most popular digital currencies are represented by the traditional safe-haven metals gold and silver.
This more than coincidental occurrence could easily be seen as a divine sign. This is because Bitcoin and Ethereum have evolved into the modern technological age’s equivalents of conventional gold and silver. You can even consider Bitcoin for your IRA or 401K, just like you can with precious metals, as recently as last year. The eerie connections between the two major cryptocurrencies and the two long-time champion, safe haven precious metals are examined in this essay.
Around a decade ago, Bitcoin was the first cryptocurrency, kicking off the digital money revolution. It made its debut as a serious going concern in 2009, forever altering the landscape of currencies and safe haven commodities.
In 2017, interested individuals can choose from over 500 other cryptocurrencies, demonstrating how successful the initial pioneer in the digital currency industry has been. Despite several attempts over the last four years to dethrone it as the digital king, Bitcoin continues to command the respect it deserves for being the first to market.
Bitcoin’s Relationship to Gold
Bitcoin appears to be so much like gold in a variety of ways, despite the fact that its enigmatic creator Satoshi Nakamoto probably never meant it with his innovative invention. Bitcoin, like gold, may not be created at random, unlike fiat currencies, which are printed at will by numerous central banks throughout the world. It is necessary to mine the two commodity currencies.
Bitcoin, like the tried-and-true yellow metal, is extremely rare. In reality, we’re getting closer every day to the point where all of the Bitcoins that can be made on the planet are created, providing that the Bitcoin protocol and programming aren’t drastically adjusted to allow for a larger quantity to be created one day.
These characteristics also make Bitcoin, like gold, a secure refuge. Because the two commodities are both fixed-supply currencies, central banks and commercial banks are unable to manage and control them easily. They can’t be given out on the spur of the moment.
Endorsements for Bitcoin are a type of endorsement that is given to a product
More than two years have passed since Bank of America Merrill Lynch reportedly predicted that Bitcoin will “emerge as a credible rival” to currency. They were referring to its inherent ability to take over digital money transfer areas (such as Western Union, Money Gram, or PayPal) as well as e-commerce transactions (like credit cards or PayPal).
Bitcoin has only become stronger since that massive endorsement and vote of confidence from the country’s once-largest brokerage firm. The network’s attractiveness stems from the fact that it is both decentralized and peer to peer.
This means that it can’t be readily manipulated by one or more central banks, and it doesn’t require the usage of central clearinghouses or even financial institutions like large multinational commercial banks to complete transactions. Bitcoin buyers and vendors simply need Bitcoin software and a stable Internet connection to make payments. They can send money to any other public account using only these two elements.
Interestingly, almost two years ago, Bank of America/Merrill Lynch underestimated the price of Bitcoin. They predicted that the maximum value of Bitcoin would reach $1,300. At today’s prices, it’s already worth more than twice that. So much for their claim that the world’s most popular cryptocurrency would need to maintain an exchange value “near to silver.”
As The New Gold, Bitcoin
Many analysts now believe that gold is the precious metals equivalent of Bitcoin, having grown to be far more than just the exchange equivalent of silver in the last two to three years. In truth, the most valuable precious metal and the most valuable cryptocurrency have a lot more in common than just price. There are five reasons why Bitcoin has grown into the new gold, whether or not that was the original purpose of its founder. These are the following:
- The average price of gold and bitcoin is now far over a thousand dollars per unit.
- In the gold and bitcoin rushes of the last decade to two decades, huge fortunes have been made.
- Both are exceedingly rare and have a finite production amount.
- Bitcoin and gold must both be mined using energy-intensive processes.
- Both goods and currencies are in high demand in today’s disintegrating countries.
- Following that, we’ll look at each of the five parallels between the king of digital currencies and the king of precious metals.
- Both gold and bitcoin prices are now averaging over $1,200 per unit.
Since solidly crossing over this threshold more than a decade ago, gold has managed to maintain an average yearly price of more than $1,000 per ounce (and even higher at over $1,200 per ounce). Since it rallied off its lows of approximately $200 per ounce towards the year 2000, the yellow metal has been on a longer-term bull market run.
Bitcoin, like gold, has had its ups and downs along the way. Despite this, since the start of the year, the cryptocurrency pioneer has been averaging over $1,000 per BTC. Clearly, this is a shorter price history than gold has shown over the last nearly two decades. However, it is difficult to imagine BTC reversing course now that it has decisively surpassed $2,700 per single BTC. Which brings us to the second significant point:
In both the gold and bitcoin rushes, huge fortunes have been made.
You don’t have to look far back in Bitcoin’s charts to see how it has enormously enriched both new and long-term supporters. This pricing chart from a year ago shows how much money investors and users made when they purchased into the world’s most popular digital currency in mid-2016:
The Bitcoin gold rush, which began in earnest in 2011, has yielded great profits, much like the gold rush. The price fluctuation of the new digital gold has certainly seen some astounding ups and downs. Nonetheless, a single bitcoin has increased in value from 33 cents only six years ago to more than double the price of an ounce of gold today.
If you had only put $100 into bitcoin in 2011, it would currently be worth more than $840,000. Gold is valuable, and it has a 5,000-year track record, but it just cannot compete with that type of price performance in any century.
In terms of total production, both gold and bitcoin are scarce and limited.
In terms of scarcity and production cap constraints, it’s fascinating how striking a connection exists between old gold and new gold. Bitcoin, like gold, was created with a restricted, finite supply on the planet. There can only be a total of 21 million bitcoins created in the physical world. When all of the coins have been “unearthed,” this is the set maximum that the source code allows.
The official estimates for how long it will take Bitcoin miners to unlock this much BTC have ranged as far as the year 2110. Regardless of how long it takes to achieve the maximum Bitcoin supply, there will never be more than this astoundingly small amount in existence, as shown in the graph below:
Gold is also a scarce commodity, with much of its worth derived from the fact that “they aren’t manufacturing any more of it.” There will simply be no more gold available after this, with an estimated total metric tonnage of gold on the earth of 171,000 tons. This graph shows that there is significantly more gold on the planet than there are bitcoins, especially when comparing ounces to BTC.
Global gold reserves are estimated to be at 377 million pounds (or 171 million kilograms). This means that, even when comparing Bitcoin units to overall gold supply measured in pounds or kilograms, there is considerably more traditional gold in the world than there is new digital gold Bitcoin.
Both gold and bitcoin are mined
It’s also worth noting that both gold and Bitcoin must be mined. Naturally, when it comes to gold, this process entails physically extracting it from the earth. Bitcoins, as a completely digital currency and commodity, must be mined online. Bitcoin miners accomplish this in practice by deciphering complicated computer encryptions.
This means that, as seen in the graph below, foolish and desperate central banks cannot simply manufacture safe haven currencies to “juice up” a sagging national or global economy.
Another analogy between the two is that generating one bitcoin, like locating, unearthing, and refining a single ounce of gold, requires a tremendous amount of time and energy. It is the effort required to manufacture a Bitcoin or process an ounce of gold that distinguishes them from paper fiat money, which governments can create out of thin air with a single keystroke.
Both gold and bitcoin are popular in countries that are on the verge of collapse.
Because both the old gold and the new digital gold are accepted in countries all over the world, they have another thing in common. This is because countries in financial crises or geopolitical turmoil select gold and Bitcoin to protect their riches as their native country crumbles.
Argentina is a perfect illustration of this point. The once-prosperous South American country now faces the most stringent capital controls and double-digit inflation rates. As a result, the Argentinians have been looking for strategies to protect the purchasing power of their currency.
An increasing number of them are turning to Bitcoin to efficiently diversify their assets away from the Argentinian peso and shift their wealth out of the country without government intervention. The demand for Bitcoin is so high that one of the exchanges is planning to create a branch in Argentina.
With all of the similarities between Bitcoin and gold, it’s simple to see why more and more investors are considering Bitcoin to be the new digital gold. There is a growing chorus of voices saying that the BTC will eventually eclipse both the yellow metal’s hedging and safe haven values. Only time will tell if this is true.
Ethereum’s Silver-Like Track Record
Ethereum is already being referred to as the “new silver.” On the 1st of January, 2017, an Ether Token cost $8. Six months later, the same coin is now worth $385. If you bought $100 worth of Ether Tokens on January 1st, your investment is now worth more than $4,810. It’s worth noting that the second most popular cryptocurrency has only been trading since 2015. In fact, ether has increased by almost 4,800 percent since the start of the year. This magnificent graph encapsulates everything:
These extreme price swings and massive volatility swings (despite trading at a far lower price than big brother Bitcoin) have helped to cement Ether tokens’ image as the new silver. However, the Ether foundation and council, which oversees the burgeoning cryptocurrency, have even bigger plans for the world’s second-largest digital currency.
Ether’s price has surged so significantly as more exchanges and businesses accept it that its market cap has recently surpassed 50% of the market cap value of larger rival bitcoin. In the market cap ratio comparison of the two, this is a historical high. Consider that on January 1st, Ether accounted for less than 5% of the overall market capitalization of Bitcoin.
As The New Silver, Ethereum
Still, Ether has a long way to go before it can be considered more than just the new silver. It has successfully challenged Bitcoin as the first of the alt-coins to do so. The real reason Ethereum has been dubbed “the new silver” is as follows. Ethereum, like traditional silver, already has more “industrial applications” than Bitcoin, the gold of cryptocurrencies.
For digital “industrial” applications, Ethereum software has made big promises that it is already delivering on. It isn’t just another form of virtual currency like Bitcoin. Ethereum provides a viable and well-proven platform for creating smart contracts. These are pre-programmed transactions and online markets that can transact automatically when certain blockchain parameters are satisfied.
Take a look at the digital “industrial” uses for the new silver that are already in use. Sports betting, paying for and managing electricity, questionable Ponzi scams, and farmers selling their own produce directly to end users are all possible using Ethereum blockchain code-based programs. Aside from that, the majority of international banks have shown a strong desire to use the Ethereum code to develop systems that would allow for speedier money transfers and trading.
The Enterprise Ethereum Alliance (EEA) is a non-profit organization
Under the guidance of JP Morgan Chase, these big names have banded together to join the EEA Enterprise Ethereum Alliance, a type of digital silver trade association. Marley Gray, Microsoft’s Business Development and Strategy Director, summed up their collective thought best:
“Ethereum is a generic platform where you can address problems in a variety of industries with a fairly elegant solution—the most elegant solution we’ve seen to far.”
JP Morgan has already developed its own Ethereum-based tool, Masala, as an example of the new digital “industrial” applications. It allows certain of their proprietary databases to communicate with Ethereum blockchains in real time. Microsoft, Intel, and IBM are just a few of the big names in tech that are looking at using Ether for their own purposes.
Take a look at the massive number of organizations (many of whom are industry leaders) that have signed on to ensure Ethereum’s success as part of the EEA. JP Morgan, Microsoft, Intel, BP, ING, Credit Suisse, Santander, and many others are among them, as shown in the graphic below from the EEA website:
When you consider how many industries are discovering uses for Ethereum and digital silver Ether tokens, it’s eerily similar to genuine silver and the hundreds of uses for the gray metal.
Do you have any BTC or ETH in your IRA or investment portfolio?
Do you have any of these cryptocurrencies in your portfolio? One of the most effective methods to invest is through your IRA. Ethereum will undoubtedly become the new silver, and Bitcoin will become the new gold. How far and how high these two new digital safe haven commodity currencies can rise may be the only limit. This is why you should look into the best Bitcoin and Ethereum IRA firms and custodians right now. As more firms and investors realize that the two cryptocurrencies represent a paradigm change in currencies and hedging commodities, their popularity and values will only rise as their place in the world of global currencies is established.