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Cryptocurrency is still relatively unexplored by the majority of consumers. This got me thinking, what kind of analysis could be done by studying the relationship between gold and silver and applying it to Bitcoin and Litecoin? Is it fair to compare cryptos to precious metals?
If we do make the comparison, how we can apply our knowledge of the precious metals market to cryptocurrency? The analysis that follows is not meant to be a sure way to predict price, it is intended to be an intellectual exercise, exploring relationships between assets, although there may be value in some of the price analysis.
Today the ratio floats, as gold and silver are valued daily by market forces, but this wasn't always the case. The ratio has been permanently set at different times in history - and in different places - by governments seeking monetary stability. If we operate under the premise that Bitcoin and Litecoin are the respective gold and silver of the cryptocurrency world, what happens when we apply the gold silver ratio to the two coins?
Prices have been rounded up to whole numbers for easy math. Some in the mining industry have claimed that currently 9 ounces of silver are mined for every 1 ounce of gold. Litecoin aims to be the silver to Bitcoin's gold and while that may soon be true, with the successful SegWit implementation, two other cryptocurrencies may provide a more accurate comparison. With faster transactions and lower fees, many people have switched from using Bitcoin to Dash for smaller transactions.
Ether is a fuel for operating the distributed application platform Ethereum. The expansion of apps on the Ethereum blockchain is increasing the demand for Ether. Ether is the fuel that powers the new DAP industry.
Silver is a precious metal and an industrial metal. Silver has a multitude of industrial uses and is valuable because of its unique properties. Of course, we cannot make a direct comparison between Bitcoin, gold, Litecoin and silver or any other cryptocurrency for that matter. Although they are all stores of value and are subjected to scarcity, their uses, markets and potentials vary greatly. Industrial use and the physical properties of precious metals cannot be captured or exactly replicated in cryptocurrency.
Even so, it is still interesting to see how the gold to silver ratio could be used to project price or used as a trading methodology. Bitcoin and Litecoin operate in free unmanipulated markets and price is not set through a fix or by ETFs.
Recently, the precious metals industry has been plagued with lawsuits and investigations into alleged price manipulation. Maybe the true value of the ratio is to reverse the calculations and determine fair value of gold and silver based on Bitcoin and Litcoin.
Perhaps the future is a merger of the two asset classes into a new hybrid asset that provides the benefits offered by crypto, of free markets and transparency and the historical pedigree and tangibility offered by precious metals. This is not financial advice, rather it is an intellectual lesson and exploration into the relationship between Bitcoin and Litecoin. The numbers used are rough estimates and are subject to change based on fluctuations in market prices. Interesting observations - thanks for sharing.
Interesting point, although palladium is not really used at all for monetary purposes. BTW did you have any problem accessing this post? There seems to be some issues with Steemit ATM.
It is definitely an interesting relationship to keep an eye on. I love the comparisons. People always ask me of a way to describe the relationship between crypto' and i think this is a great way to explain them. These comparisons are not set in stone, they are fluid and subject to interpretation. I do think asking these questions lends to an interesting discussion. I am glad you enjoyed reading my article! Applying the Gold Silver Ratio to Cryptocurrency.
One well known price indicator used for precious metals is the gold to silver ratio. What is the gold to silver ratio? How the Ratio Works According to Investopedia. What can we learn by applying the gold silver ratio to Bitcoin and Litecoin? Applying the gold silver ratio to Bitcoin and Litecoin If we operate under the premise that Bitcoin and Litecoin are the respective gold and silver of the cryptocurrency world, what happens when we apply the gold silver ratio to the two coins?
As I stated before, the current ratio has been around Historical Average Historical average around Food for thought… This is not financial advice, rather it is an intellectual lesson and exploration into the relationship between Bitcoin and Litecoin. KeepKey If you want to stay up to date on crypto news follow my blog digicrypt. Authors get paid when people like you upvote their post. Everything is kosher at my end. Some people are having trouble accessing certain links at the moment.