When the Central Banks finally lose control of propping up the markets, will the BIG MONEY be made in owning gold, silver or crypto-currencies?
This is the question many investors who are focused on “alternative assets”, outside the typical mainstream stock, bond and real estate markets, are asking.
Most investors who have been concerned about the massively inflated Bubble Markets and the Greatest Financial Ponzi Scheme in history, have been investing in gold and silver. However, a new kid on the block, called Bitcoin and the other crypto-currencies, have gained a lot of attention due to the huge increase in their prices over the past few months.
So, now many investors are wondering what to make of these extremely volatile crypto-currencies and if they are nothing more than purely speculative and gambling vehicles. This is a logical assumption based on the massive spike in many of their crypto-currency values.
That being said, Charles Hugh Smith wrote the following in his article, Projecting The Price Of Bitcoin:
The wild card in cryptocurrencies is the role of Big Institutional Money.
I’ve taken the liberty of preparing a projection of bitcoin’s price action going forward:
You see the primary dynamic is continued skepticism from the mainstream, which owns essentially no cryptocurrency and conventionally views bitcoin and its peers as fads, scams and bubbles that will soon pop as price crashes back to near-zero.
Skepticism is always a wise default position to start one’s inquiry, but if no knowledge is being acquired, skepticism quickly morphs into stubborn ignorance.
Bitcoin et al. are not the equivalent of Beanie Babies. Cryptocurrencies have utility value. They facilitate international payments for goods and services.
This was very interesting analysis done by Charles Hugh Smith who is one of the more bright minds in the alternative media community. I have watched Bitcoin out of the corner of my eye over the past few years, but have not placed much attention on the leading crypto-currency. However, as the price of Bitcoin and crypto-currencies have surged over the past several months, I decided to take a closer look… to see what all the hubbub was about.
What I found out was quite interesting. Bitcoin’s price rise is not just based on mere speculative flows (as many assume), but rather it’s also rising due to the skyrocketing energy and capital costs to produce each coin. Yes, there is a lot more to this, but there is some METHOD TO THE MADNESS.
Charles Hugh Smith understands this and realizes that cyrpto-currencies will likely to continue to gain in price, interest and market cap going forward due to the way they were designed. Now, I am not saying I totally agree with Charles, but there is more behind crypto-currencies than just mere speculative flows into digital assets.
So, the question is…. where will the BIG MONEY be made when the Fed and Central Banks lose control of propping up the Markets? That’s a good question. Yes, the Central Banks will lose control because they are facing one force that they are unable to manipulate…. ENERGY.
While the Central banks can manipulate the oil price, than cannot manipulate the Falling EROI – Energy Returned On Investment that continues to decline. So, the more the EROI of oil falls, the more printing and propping up the markets the Central banks are forced to do. It is really that simple.
Thus, the END OF MARKET MANIPULATION has an expiration date…. and its not decades away. I wouldn’t be surprised that it takes place within the next 5-10 years… or even less.
To get an idea of the total current value of Gold, Silver and Bitcoin-Crypto-currencies, let’s take a look at the value of above ground gold and silver investment:
According to the data put out by the USGS – U.S. Geological Survey, GFMS, CPM Group and Kitco (market price), all the investment gold held in the world is worth $2.93 trillion versus $51.8 billion for silver. You will also notice that there isn’t much more above-ground investment silver in the world (2.59 billion oz) compared to gold (2.25 billion oz).
NOTE: The total global gold and silver value is based upon $1,300 for gold and $20 for silver
Now, if we bring in the total value of Bitcoin and all the other crypto-currencies, we have the following:
All the gold investment (including Central Bank and private investment) is approximately $2.93 trillion versus $89 billion for the total Bitcoin-Cryptos market cap and $52 billion for silver. So, the current market cap of Bitcoin-cryptos now surpasses the total global value of silver investment by $37 billion.
Of course, the Bitcoin-cyrpto market cap has increased significantly over the past few months. Common sense logic suggests the recent spike in Bitcoin and the other crypto-currencies will likely experience a large correction… thus a falling market cap. But, I agree with Charles Hugh Smith that these crypto-currencies will likely gain significantly over the next five years.
However, I also see the value of gold and silver rising considerably as well…. especially silver. The price of silver will likely increase in a much greater percentage because there isn’t much more physical silver in the world compared to gold, and its price is so low, that when large funds move into the silver market…. the huge pressure will be released by a much higher price.
There is a lot to understand about Gold, Silver and the Crypto-currencies going forward. Investors need to realize that while the crypto-currencies will likely see large gains in their values in the future, the BIG ENERGY PROBLEMS will are going to face may not be good for Cypto-currency network functionality. Again…. there is a lot of consider.
Which means… gold and silver will still be the some of the safest physical assets to own in the future.