Throughout traditional finance, a number of investors have been able to buy physical silver to diversify their portfolio. In today’s digital markets and in light of 2020’s economic downturn, more investors are turning to alternative assets like cryptocurrencies as a way to shelter their wealth from quantitative easing and faltering markets. Because cryptocurrencies are still very new and often experience high volatility and risk levels, many investors are choosing to wet their feet with stablecoins.
In this article, we’ll talk about why people are investing more in silver, what stablecoins are, and why a silver-based stablecoin such as SilverCoin is a more desirable choice than physical silver for a growing number of investors.
Why Invest in Silver?
It’s been estimated that humans have been storing part of their wealth in silver for over 4000 years. As an investment, Silver supplies an important hard asset that has held value for millennia. In recent years, the demand for industrial Silver has grown significantly, adding to the value that investors attach to it. Silver is used extensively in jewelry making, in the production of chemicals and photovoltaic cells, and in cell phone production. It’s practical use and limited supply are part of the attraction for investors.
With emerging markets fast becoming digitized, the need for physical silver to use in making cell phones is rapidly increasing. Higher demand normally produces a higher value placement or price, and this demand appears to have a strong future.
What Are Stablecoins?
A stablecoin is a digital currency that, like other cryptocurrencies, uses cryptography and blockchain technology to enable peer-to-peer trading with a high level of security in markets that run 24/7.
But what sets stablecoins apart is that they are backed 1:1 by another asset that is held in reserve, usually a fiat currency like USD or a basket of assets that includes a mix of fiat and crypto.
Because the coin is backed by a more stable asset with less price volatility, it appeals to investors who want to diversify with cryptocurrencies but who also want a lower risk asset.
Today’s most prominent fiat-backed stablecoin is USDT/Tether, which has a current 7-day trading volume of over $52 billion, which is far more than any other cryptocurrency, including Bitcoin and Ethereum.
Now that you have an idea of why people invest in Silver and stablecoins, let’s put it all together and find out why Silver-backed stablecoins are so appealing in today’s volatile markets.
Silver-Backed Stablecoins vs. Physical Silver: 3 Key Advantages
Before we get to all the advantages of investing in Silver-backed coins over physical Silver, it’s important to mention that as a hard asset, Silver is less liquid than Gold. This essentially means there are more buyers and sellers of Gold than Silver. In other words, Gold markets are more liquid. This can mean that Silver’s price is more volatile and vulnerable to market swings.
However, interest in other precious metals, primarily Silver, is on the rise. This is primarily due to a looming recession causing investors to turn more to safe haven or “hard” assets.
Read on to learn the benefits of investing in Silver-backed stablecoins versus physical Silver.
1. Storage concerns and security are allayed – When you buy physical Silver, you are responsible for storing it and keeping it safe. This may include a safe, a safety-deposit box, a security system and the related expenses. With a Silver-backed stablecoin, you have a digital representation of an amount of Silver that is backed by other, less volatile assets. You also enjoy the increased security derived through encryption and immutable blockchain ledgers.
2. Financial democratization increases – Because stablecoins are cryptocurrencies, it is easy to fractionalize the buying of Silver-backed stablecoins. One does not need to buy an entire bar of Silver or a certain number of coins. Anyone anywhere in the world can go online and buy into a Silver-backed stablecoin in any amount. This type of digital asset levels the playing field for investors worldwide.
3. Investors have a less volatile onramp to cryptocurrency investing – Cryptocurrencies are still new and highly volatile. Investing in a Silver-backed stablecoin enables investors to enter crypto markets with less risk. Buying physical Silver is limited to precious metal markets, whereas Silver-backed stablecoins help usher in the modern era of investments and are available on public ledgers every day of the week.
With inflation worries surrounding the $9 trillion expansion of USD in 2020, fiat currencies are simply not as desirable as a reserve asset for stablecoins as they were a year ago. Silver-backed stablecoins represent a high-security investment in hard assets that is in step with the digital currency landscape.
