In a recent interview on the “Fast Money Halftime Report,” renowned trader Mark Fisher discussed the similarities between the current hype for the cryptocurrency Bitcoin and the silver rush seen in the late 1970s and 1980s. Fisher attributes Bitcoin’s rapid rise in value to its organic popularity (i.e., no meddling by Wall Street) and massive public interest. However, what truly separates Bitcoin from silver is that Bitcoin is a cryptocurrency, while silver is, and most likely always will be, considered a precious metal. Therefore, Bitcoin’s value as a currency is completely determined by the value placed on it by consumers. While some are beginning to consider Bitcoin the first incarnation of digital bullion, there are some important points to consider before placing the same level of trust in it as one would for gold or silver.
“Cryptocurrency” is defined as a subset of digital currency in which cryptography is used to securely process transactions that are initiated with more typical currency. Bitcoin made history as the world’s first “decentralized cryptocurrency” in 2009, and many similar cryptocurrencies have begun to arise in its wake. Bitcoin allows users to make secure and confidential transactions that cannot be traced through regular means. The notorious cryptocurrency has soared to over $11,000 in value over the last week, creating a massive boon to investors. However, some experts warn that the chaotic rise of Bitcoin’s value is a testament to its weakness as a currency, rather than its strength, and predict an incoming bubble.
Gold and silver, on the other hand, have been considered precious metals for thousands of years by many different civilizations. These precious metals have faced the test of time and consistently came out virtually unscathed in their unquestionable value. Silver is useful in the construction of solar panels and water filtration systems. It is used in disinfecting compounds and important medical instruments, and is considered by chemists to be an important catalyst.
Gold additionally has some extremely practical uses in electronics and infrared shielding, and is famed for its resistance to acid, corrosion, and chemical reactions. It is important to note that even if their aesthetic value were to diminish as precious metals, their value for industrial purposes will likely never diminish.
While it is an exciting time for Bitcoin investors, it is important to always take everything you read (including this) with a grain of salt. Bitcoin may make for an excellent short-term investment, but gold and silver will almost always be considered an excellent long-term investment.