Can Cryptocurrency Affect the Price of Precious Metals? What to Expect in 2020 and Beyond?
You must have heard that the digital form of silver and gold—Bitcoin and other cryptocurrencies—have significantly affected the precious metals market over the past decade.
Though the value and demand of some of the cryptocurrencies have declined among the investors, it seems to be making a dramatic return again.
For precious metals investors, it’s important to consider how these digital variants will affect the value of the holdings in the long run.
In this blog, we’ve discussed in detail how good or bad the evolution of these cryptocurrencies will prove to be for the precious metal market and their prices.
Bitcoin’s Temporary Rise
Soon after its launch, Bitcoin saw a significant surge in demand and value. Old and new investors started shifting their investments from the non-volatile gold and silver to Bitcoin.
However, its meteoric rise came down crashing in 2018, as its price dropped from an impressive $20,000 high to an alarming low of $6000 low.
This price-fall soon became a concern for investors who started moving their investments, yet again, from cryptocurrencies. While some investors are still positive about the potential price growth of Bitcoin and other digital investments, it doesn’t look like precious metals investors care very much.
Why Don’t Precious Metals Investor Seem to Get Affected?
The value of gold and silver saw a sharp decline during January, because of the crushing fiat currencies, and ever-increasing credit cycles. The breakout of the deadly coronavirus made the market situation even worse.
As the stock market tumbled, stockholders started moving their investments to purchase gold and silver. The sudden increase in demand and limited supply leads to a massive price surge.
As of April 23, 2020, the price of gold is 1,732.80—up from a year low of $1,472.35during January. As of now, the price of silver is $15.36, which increased from a year-low of $11.77 and is further estimated to increase to up at least $18 or more.
Experts believe that the temporary halt of American Eagle silver bullion coins production will serve as a significant contributor for the price surge, as the demand is increasing and supply is minimal.
It’s true that the prices of gold and silver “have a slight tendency” to get affected by the rise of cryptocurrencies. However, there are still countless security and legal issues with digital investments that are yet to be addressed.
Therefore, considering the current economic and market situations, it’s safe to say that cryptocurrencies cannot replace the demand for precious metals.