Beyond gold: Are Bitcoin and silver better comparators?

Gold's appeal rests almost entirely on its status as a store of value. Central banks have accumulated over 1,000 tons annually in recent years, treating it as a monetary asset rather than an industrial commodity. It sits in vaults, accruing worth through scarcity and collective belief. 

While gold serves some role in jewelry and electronics, these applications represent consumption rather than functional utility in the economic sense. 

Bitcoin shares this store-of-value function, evidenced by its $1.7 trillion market cap, but simultaneously operates as a functional payment network, processing billions in daily cross-border transactions that bypass traditional banking infrastructure.

Silver comparable

Silver operates in both spheres at once. As a precious metal, it serves as a safe haven during uncertainty, reflected in its recent surge past $120 per ounce, perhaps reflecting a crisis of confidence in the US Dollar. 

But its industrial applications (highest electrical and thermal conductivity of any metal, indispensability for electronics, solar panels, and batteries) create a fundamental value floor independent of monetary factors. 

Solar panel manufacturers are now scrambling to reduce silver content or find substitutes as prices climb, demonstrating that industrial demand creates genuine pricing pressure. Even if every investor abandoned silver tomorrow, manufacturers would still need it.

Bitcoin embodies this same duality. Its decentralized payment network provides real economic value for cross-border payments, remittances, and transactions in jurisdictions with capital controls or unstable currencies. The Lightning Network and other second-layer solutions have dramatically improved transaction throughput, making it increasingly practical for everyday commerce. 

This utility gives it value beyond speculation, just as silver's industrial demand supports prices alongside monetary premium. Both combine scarcity with function, creating more robust value propositions than gold's purely monetary appeal.

Market dynamics in the dollar crisis

The dollar's decline has exposed vulnerabilities in the purely monetary framework. The US Dollar Index has fallen 15.6% from its 2022 peak, hitting levels not seen since 2017. More troubling, its share of global reserves dropped from 65% in 2001 to just 40% today; a structural shift driven by concerns about unsustainable US debt levels, now at $38.5 trillion. 

Federal Reserve Chair Jerome Powell himself describes current conditions as ‘crisis-level deficits at full employment.’ President Trump, who will soon select Powell’s replacement,  recently asserted that the dollar is ‘doing great’ despite its steep decline, which has only intensified what indeed may well be a crisis of confidence. And the IMF is now stress-testing unthinkable scenarios of rapid dollar asset sell-offs.

In this environment, assets offering both utility and store-of-value characteristics gain appeal precisely because they don't depend solely on monetary premium. Gold has reached more than $5,500 per ounce, but silver's 277% year-on-year gain and 61% surge in a single month demonstrate how utility-backed assets can outpace pure monetary alternatives. Vanda Research notes that retail trading in silver ETFs has been ‘more intense than the classic AI trade,’ with turnover exceeding eleven times normal levels. 

Bitcoin, trading near $88,000 after pulling back from January's $97,000 peak, shows similar patterns. Institutional holders may be increasingly viewing the alternative asset as a hedging tool with derivatives shifting toward options rather than perpetual futures.

Both Bitcoin and silver feature supply constraints that create explosive upside during demand surges. Silver faces physical mining limitations, refining capacity and geological availability. Bitcoin follows a predetermined algorithmic cap of 21 million coins. 

Both attract retail enthusiasm during bull markets and support active futures and ETF markets with mixed participation from speculators and utility users. Gold, by contrast, trades primarily as a monetary asset with stabilizing central bank buying, making Bitcoin-gold comparisons perhaps less valuable compared to Bitcoin-silver for expected price behavior and portfolio diversification benefits.

The case for dual-purpose assets

The fundamental lesson lies in recognizing that utility matters. Assets backed solely by monetary premium, whether gold's ancient status or the dollar's reserve position, depend on collective confidence and network effects. 

When that confidence erodes, as it has for the dollar in recent months, these assets face existential questions about their value proposition. Silver retains value because industry needs it for technological applications. Bitcoin retains value because its payment network provides genuine economic function, particularly for cross-border payments and transactions in jurisdictions with unstable currencies. 

The monetary premium layered atop this utility creates upside potential, but the utility floor provides downside protection that pure monetary assets lack.

This doesn't mean utility-backed assets are superior. Gold's low volatility and deep market structure make it appropriate for specific portfolio roles; the dollar's network effects and legal tender status ensure continued dominance despite declining reserve share. But for investors seeking alternatives during monetary instability, the Bitcoin-silver framework may offer more insight than Bitcoin-gold comparisons. 

Critics point to Bitcoin's higher volatility, simply because gold's volatility runs around times lower, but silver's recent price action demonstrates that even physical commodities can experience extreme moves when market conditions align. Its recent crypto-style volatility suggests that market structure and momentum dynamics matter more than asset nature.

Silver's recent quadrupling of the S&P 500's return in a little under a month and Citi's raised price target from $100 to $150 per ounce reflect recognition that industrial fundamentals support prices alongside monetary factors. Bitcoin's evolution from speculative asset to institutional portfolio component follows a similar trajectory, with growing adoption through spot ETFs, corporate treasury allocations and payment infrastructure. 

El Salvador's legal tender adoption and firms like Strategy's holdings reflect genuine use cases beyond speculation. Historical patterns suggest Bitcoin often lags precious metals initially during dollar weakness before catching up dramatically. For context, the last time the dollar fell this sharply was 2017, just before Bitcoin rallied from under $200 to nearly $20,000.

Investors may soon recognize that assets combining store-of-value properties with real-world utility offer superior risk-adjusted returns during monetary instability. The evidence increasingly suggests they do, and that the Bitcoin-silver comparison provides the more useful analytical lens for navigating the challenges ahead.

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