Silver vs. Bitcoin: Titans of Store of Value & the role of our Bitcoin Bot

1. INTRODUCTION

With this year’s astounding surge, BTC is rapidly becoming one of the largest global assets, surpassing the $1.3 trillion market capitalization threshold. It’s now nearing silver’s market cap of $1.4 trillion, according to data compiled by CompaniesMarketCap. However, market cap isn’t the only similarity between Bitcoin and silver. In this article, we’ll uncover five other parallels between Nakamoto’s coin and this precious metal. Haven’t invested in either of these asset classes yet? Then this article might help you make a wise decision about whether or not to do so. And for those considering it, we’ll also discuss how you can increase your BTC earnings with Oxido Solutions’ Bitcoin bot solution.

2. STORING VALUE

A store of value serves as a means for people to safeguard and preserve their wealth over time. Among the earliest assets fulfilling this role is silver. Historical evidence suggests that silver was initially utilized as a store of value as far back as 3000 BCE in Mesopotamia, encompassing modern-day Iraq, Syria, and Iran. Archaeological discoveries from ancient Mesopotamian cultures like the Sumerians and Akkadians indicate the use of silver bars as a means of storing value, often hidden in chests in secretive locations.

In modern times, silver and other precious metals remain popular choices as stores of value, particularly in nations grappling with high inflation rates. This trend extends to Bitcoin, with notable examples including Turkey and Argentina. In 2023, Turkey experienced an annual inflation rate of 50.51%, while Argentina’s rate soared even higher to 104%. Ownership of digital currencies like BTC surged in these countries, reaching 27.1% in Turkey and 23.5% in Argentina — significantly surpassing the global crypto ownership rate estimated at 11.9%, as reported by research firm GWI.

3. LIMITED SUPPLY

Is there any other reason why silver and Bitcoin serve as stores of value? Absolutely. Both of them have a limited supply.  Silver’s scarcity is rooted in its geological characteristics and the complexities involved in its extraction and production. Unlike fiat currencies subject to printing by central banks, silver’s availability is constrained by natural factors and economic considerations. Found in the Earth’s crust, silver, although relatively abundant compared to certain other precious metals, remains a finite resource. The mining of silver demands substantial investment in technology and operations, often complicated by its association with other metals like lead, zinc, and copper, heightening extraction costs and complexities. Moreover, silver mining entails environmental and social implications, occasionally leading to regulatory hurdles and community resistance in certain areas.

Economic factors also influence silver’s supply dynamics. Price fluctuations, technological advancements, and geopolitical conditions can impact mining profitability, prompting companies to adjust production levels or halt operations during periods of low prices, further limiting supply.

Bitcoin, on the other hand, is even scarcer than silver. Introduced by Satoshi Nakamoto in 2009, Bitcoin was designed with a maximum supply of 21 million coins, akin to precious metals like gold and silver, fostering a deflationary environment. The protocol enforces scarcity through “halving,” occurring approximately every four years or every 210,000 blocks. The next halving is set for April 21, 2024.

During halving events, the rate of new Bitcoin issuance halves, curbing inflation and slowing down new coin creation. Consequently, the controlled supply curve fosters scarcity, a fundamental driver of Bitcoin’s value proposition as a store of value.

4. DIVISIBILITY

Silver and Bitcoin possess another similar attribute: divisibility, allowing them to be subdivided into smaller units or increments. Bitcoin’s divisibility is enabled by its digital essence and blockchain technology. Each Bitcoin unit can be divided into eight decimal places, with the tiniest unit referred to as a Satoshi. This degree of precision facilitates microtransactions, empowering users to conduct transactions involving minuscule amounts of Bitcoin. Whether it’s buying a cup of coffee or executing a multi-million-dollar investment, Bitcoin’s divisibility guarantees smooth transactions of any size.

Moreover, Bitcoin’s divisibility fosters versatility in its usage. Users can tailor transactions to suit their specific needs, whether it’s transferring large sums internationally or conducting small peer-to-peer payments. This flexibility enhances Bitcoin’s usability as a medium of exchange, promoting its adoption across various industries and use cases.

Unlike Bitcoin’s decimal-based divisibility, silver achieves divisibility through its physical properties, primarily its weight. While silver may not offer the same level of granularity as Bitcoin in terms of decimal places, it can be divided into smaller units through alternative means. Fractional silver coins, such as 1/10th, 1/4th, or 1/2 ounce coins, provide the opportunity to own smaller increments of silver without committing to full ounces.

Additionally, silver’s divisibility extends to its storage and distribution. Larger silver bars can be melted down and subdivided into smaller pieces, catering to the needs of individual investors or industrial users. This flexibility allows investors to tailor their silver holdings to their budgetary constraints or investment goals, democratizing access to this precious metal.

5. DECENTRALIZATION

Decentralization serves as a fundamental principle for both silver and Bitcoin, albeit expressed in distinct ways. Silver’s decentralization is deeply entrenched in its historical significance. Throughout civilizations and epochs, silver has been naturally occurring in various parts of the world, ensuring its accessibility to diverse communities. This historical decentralization is evident in the widespread distribution and ownership of silver. Individuals across the globe hold small amounts of silver, whether in the form of jewelry, coins, or bullion, contributing to its decentralized nature.

On the other hand, Bitcoin’s decentralization is intricately tied to its technological framework, particularly its blockchain technology. The blockchain operates on a decentralized network of nodes, ensuring no single entity has control over the entire network. This decentralized structure enables peer-to-peer transactions without the need for intermediaries like banks, fostering a system of trust and autonomy.

However, despite the decentralized ethos embedded in Bitcoin’s design, challenges to its decentralization have emerged over time. One such challenge is mining centralization, where a few large mining pools control a significant portion of the network’s hash rate. This concentration of mining power raises concerns about the network’s decentralization and potential vulnerabilities.

Moreover, the increasing involvement of institutions, such as banks and hedge funds, in the Bitcoin ecosystem has sparked debates about its decentralization. Critics argue that institutional participation may undermine Bitcoin’s core principles of decentralization, potentially leading to centralization of power and control.

6. INVESTMENT

In our discussion thus far, we’ve explored the divisible and somewhat decentralized nature shared by both silver and Bitcoin, attributing their value as a store of value to their limited supply. Additionally, they serve as investment vehicles, but before we delve into why, let’s clarify the distinction between a store of value and an investment. A store of value maintains its worth over time, acting as a hedge against inflation or economic uncertainty, while an investment aims to generate profits over time.

Now, let’s delve into practical strategies for monetizing silver and Bitcoin. Investing and trading are two popular methods. With silver, individuals can purchase physical silver intending to sell it in the future at a higher price. Bullion dealers and local coin shops offer various silver coins and bars, providing convenient options for in-person transactions. Moreover, online retailers and auction sites like eBay offer a broad selection of physical silver products. However, it’s essential to conduct thorough research on the seller, understand pricing and premiums, and consider storage options before making a purchase.

For those who prefer not to hold physical silver but still wish to profit from its price movements, trading platforms provide contracts for difference (CFDs) and futures contracts. Trading silver CFDs involves entering into a contract with a broker to exchange the price difference between the contract’s opening and closing. This approach offers flexibility and leverage, enabling traders to profit from price fluctuations without owning the metal itself.

Similarly, trading silver futures contracts entails agreements to buy or sell a specified amount of silver at a predetermined price on a future date. Like CFDs, trading silver futures does not involve physical ownership of the metal but allows traders to speculate on its future price direction. Both silver CFDs and futures contracts offer opportunities to profit from silver price movements without owning or storing the metal.

Where the price of silver generally comes with relatively low volatility, Bitcoin is actually much more volatile. Just like with silver, you can buy “real” Bitcoin. This is possible through cryptocurrency platforms such as Bybit, Kraken, OKX, or Binance. But there is also the option to trade Bitcoin futures contracts, where you don’t necessarily need Bitcoin as collateral, but can instead use stablecoins like USDT or real US dollars.

7. OUR BITCOIN BOT

At Oxido Solutions, we specialize in trading bots. Just in case you’re not aware, these are software programs designed to follow specific rules that pinpoint opportunities to buy and sell within the financial markets. They also interact with other systems and are utilized by investors to boost their capital while minimizing risks. While we currently do not offer a trading bot for silver CFDs and silver futures, we do provide one for Bitcoin Futures. This bot helps traders capitalize on the volatility of Bitcoin to generate passive income in BTC, USDT, or fiat currencies. Those who choose to accumulate with our BTC bot can securely store their assets as a store of value in a cold storage wallet, a type of cryptocurrency wallet disconnected from the internet, thus minimizing vulnerability to hacking and cyber attacks compared to hot wallets.

Our Bitcoin trading bot emphasizes risk management and is equipped with a comprehensive set of 7 key features:

7.1. BTC Strategy
Our bot follows a trend-based strategy informed by technical analysis, using a multi-strategy algorithm with two versions of the ATR. This algorithm deploys breakout strategies to issue buy or sell signals when prices exceed set boundaries, ensuring adaptability to different market environments.

7.2. Trading Pairs
Designed for Bitcoin futures, our bot accommodates two types: Standard Bitcoin Perpetual Futures and Bitcoin Perpetual Inverse Futures. Standard Perpetual Futures project Bitcoin’s future price indefinitely, settling in fiat currencies like USD or stablecoins such as USDT. Bitcoin Inverse Futures settle in Bitcoin, allowing direct speculation on the cryptocurrency’s price movements.

7.3. Risk Levels
The bot provides three levels of risk—low, medium, and high—to align with traders’ investment objectives, with risk exposures of 2%, 3%, and 4% of the trading capital per trade, respectively.