Which would you rather have?
Copyright 2012 Bloomberg Finance LP
As bitcoin continues to show remarkable resilience in the wake of a renewed clampdown in China, Deutsche Bank has updated its research material on the cryptocurrency sector by drawing parallels not only between bitcoin and gold, but also between Ethereum and silver.
Marion Laboure, senior economist and market strategist at Deutsche Bank, made the comparisons on a new research page outlining her perspective on the world’s two most valuable digital currencies.
“History shows that humans had always a strong willingness to store their money in an asset which is different from the day-to-day working arrangements of governments and authorities,” she said in filmed remarks about the concept of safe-haven assets, which have a limited supply on the planet and therefore cannot have their value manipulated by central banks.
“Until recently, gold has been this primary asset. So I could envision bitcoin to be a kind of digital gold where people can store their value as well.”
This is not the first time that a major investment bank has drawn an analogy between the world’s leading cryptocurrency and the world’s most valuable precious metal. In January, J.P. Morgan strategists opined that “bitcoin’s competition with gold has already started” and that millennials are likely to trigger a “crowding out of gold” owing to their preference for digital assets.
However, financial institutions have largely avoided making the same comparison between Ethereum and silver.
The world’s second largest cryptocurrency has a market cap roughly half the size of bitcoin’s, but is favored by some owing to its adoption of smart contracts – automated scripts of code that improve the functionality of a blockchain.
Broaching that subject, Laboure added in written remarks: “Bitcoin is clearly the pioneer, and the most traded crypto. Its market cap is ways bigger than the market cap of the number two Ethereum, which offers many applications and use cases, such as decentralized finance (DeFi) and non-fungible token (NFT). If bitcoin is sometimes called ‘digital gold’, Ethereum would then be the ‘digital silver’!”
It’s unclear whether Laboure’s commentary on Ethereum is a personal viewpoint or a reflection of deeper policy assessment at Deutsche Bank.
Numerous other cryptocurrencies have, in the past, laid claim to the title of “digital silver”.
Charlie Lee, the founder of Litecoin – one of the earliest cryptocurrencies spawned from bitcoin’s seminal codebase – said in 2011 that he “wanted to create something that is kind of silver to bitcoin’s gold”. Ultimately, however, Litecoin failed to keep pace with broader innovation in the sector and now ranks just 17th in CoinMarketCap’s list of the most valuable cryptocurrencies.
Unlike bitcoin – which stands alone as the oldest and largest cryptocurrency, and the only one to have won mainstream institutional support – Ethereum faces stiff competition from a number of rival protocols that claim to offer the same advanced functionality.
Fellow top-ten coins Cardano, Binance Coin, Solano and Polkadot all deploy smart contracts on their native chains or correlated para-chains.
If one of these cryptocurrencies matures into the dominant platform for DeFi and NFTs, then there could be merit to giving it the label of “digital silver”. Demand for silver is driven not just by its reputation as a precious metal with limited supply and aesthetic appeal, but also its practical use in a number of industries – ranging from semiconductors to photography to dentistry.
However, Laboure is jumping the gun when she suggests that Ethereum has seen off competition for the title.
And even if it does become widely recognized as “digital silver”, there’s a sting in the tail for investors. For all its use cases, the market cap of silver is about one-ninth the size of the market cap of gold.