When I began investing in precious metals, I did so with the hope that “storing” my fiat in a semi-liquid, appreciable asset, would not only allow me to grow my wealth in a steady manner, but invest in something that would retain value. Even in the event that a government collapsed, or a country was invaded, or a fiat currency went haywire – the precious metals I held would retain their worth. I even reasoned that they could be used for trade or barter in this hypothetical collapse of society.
As I began to earn and delve more into Crypto, I realized that as an appreciable asset, crypto seemed to far outperform gold or silver. The market, of course, is turbulent and unpredictable, but the unprecedented growth and use of crypto has made it desirable among speculators.
Gold and silver on the other hand, have been relatively flat. In the same time period since Bitcoin began its run, Bitcoin has seen a nearly 61,500% increase – Gold is down 15% and Silver is down about 25%.
Gold - APMEX
Silver - APMEX
Bitcoin - Coinbase
As stable assets, Gold and Silver offer a reasonable approach to parking fiat. It allows a savvy investor/saver to turn paper money into physical value. Since the world abandoned the Gold Standard in the 1930’s, fiat currency has become increasingly volatile and subject to massive inflation. Precious metals (with the exception of palladium) have remained relatively constant in their slow drive downwards.
Of all the four precious metals, gold, silver, palladium and platinum, the rise and fall of silver seems to most accurately resemble that of Bitcoin. In 2011, it saw a massive jump, almost 300% with a sell off, a period of leveling, a small run, and then leveling off again.
Silver since 1990
In my mind, silver more closely resembles Bitcoin – there is an industrial need for it, but it is not seen as a serious “valuable” asset, comparatively to Gold/Palladium/Platinum, which all have industrial uses. Bitcoin and Crypto in the same manner fill a need, but is not yet being taken as seriously as it could be, and, is competing against standard investment vehicles – cash/stock/Gold.
This then begs the question – is there value in purchasing precious metals with Crypto.
The leading online precious metal retailer, APMEX, accepts Bitcoin and Bitcoin Cash in exchange for precious metals. I found this intriguing simply for the fact that I hadn’t seen it talked about much, if at all. And for many around the US, is a primary point for purchasing gold, silver and even copper.
When I was in my precious metals phase, I often thought about spending my Bitcoin on their site. I said, “here is a way to turn a digital asset into a physical asset. I can buy something I can always turn into fiat latter.”
This thinking was wrong. Though I did not see it at the time.
Why was it wrong?
The growth value of the two assets is not equal. If I were to park my crypto in precious metals, I would cap my potential earnings over the long run. For example – If I bought 1oz of gold at $1300 with Bitcoin, my gold would most likely be worth around $1300 a year from now. However, with the volatile nature, but investment potential of Bitcoin, that may be worth $2000. (The numbers I’m using here aren't “math” per say – just illustration)
My point is this, precious metals are useful for parking Fiat in the face of inflation or deflation and can easily be turned into fiat when necessary. They act as a physical buffer to the economy.
Crypto on the other hand functions like an investment – it swings more drastically and is more accessible to quotidian buyers than physical precious metals. Especially now that major exchanges have considered offering Bitcoin and other cryptos on their platforms, that volatility and ability to increase in value are going to grow.
Parking crypto in precious metals decreases your future buying power, where as parking your fiat preserves your buying power. You also will end up loosing crypto value on shipping – if I pay $15 in shipping in BTC, and a year later BTCs price doubled, I just payed double what it normally cost – and APMEX gets that profit.
Ultimately, we do run the risk of major losses holding on to crypto, either through price swings, hacking, theft, or loss of access to wallets. But replace crypto in that sentence with fiat or gold and it reads the same. In my mind though, the loss potential for crypto is greater, while it is still in its infant stage.
But as I’ve said before – I’m in this to hodl – and I hold everything in cold storage, so my assets are safe. But I won’t be buying precious metals with crypto anytime soon. That I’ll save for fiat.