Silver price has done well this year as signs that the manufacturing sector is recovering and that the Federal Reserve will start cutting rates later this year emerged. The iShares Silver Trust (SLV) has jumped by more than 15% and is hovering at its highest level since 2021.
Bitcoin has also done well this year. It has jumped by about 50%, making it the best-performing big asset. In this case, it has outperformed the likes of the Nasdaq 100 and S&P 500 indices by far. It did this after the Securities and Exchange Commission (SEC) said approved eleven spot Bitcoin ETFs.
This article will compare the iShares Silver Trust and the iShares Bitcoin Trust (IBIT) and explain the best asset to invest in.
Key fundamentals
Silver and Bitcoin are significantly different assets, making it an apples-to-oranges comparison. Silver is both an industrial and precious metal that has been in use for millennia. It is used to manufacture jewellery, kitchenware, semiconductors, mirrors, and other items.
Silver is also seen as an alternative to gold, the most precious metal in the world. As a result, some investors buy it a a proxy for gold, which has jumped to over $2,300.
Silver is impacted by several factors. First, its price reacts to the supply and demand dynamics. In this case, investors look at the production levels and compare it with consumption.
Experts expect that mine production will jump by 4% this year to 843 million ounces while the total supply is expected to move to 1.02 billion ounces. The total supply comes from mine production and recycled silver.
Silver demand is also expected to rise as the manufacturing and industrial activity in the US, China, and Europe continue. Demand will reach 1.2 billion ounces, meaning that it will have a supply deficit, which will help its price.
Silver is also impacted by the actions of the Federal Reserve. In most cases, it rises when the Fed has turned dovish, pushing the US dollar index lower. That explains why the price of silver has jumped this year as most analysts expect the Fed to cut rates.
Bitcoin, on the other hand, is seen as a digital gold. It is used as a currency and an investment. Unlike silver which has an unlimited supply, Bitcoin has a fixed one. There will be just 21 million Bitcoins ever and the total circulating supply has jumped to 19.6 million.
Bitcoin also goes through the halving process every four years, which reduces the block rewards by half. The implication is that the number of coins that are produced every year have been falling as the mining difficulty has jumped.
Therefore, while Bitcoin and silver have some strong fundamentals, it seems like Bitcoin is a better investment here. Besides, it has limited supplies and demand from institutional and retail investors is soaring.
Bitcoin vs silver performance
Meanwhile, Bitcoin has been a better performer than silver in the past 15 years. BTC has jumped from less than $1 in 2009 to over $65,000 today. It has jumped by over 1,200% in the past five years while silver is up by less than 100%.
The same trend is happening this year as Bitcoin has jumped by 50% and silver is up by 15%. Analysts believe that Bitcoin has more upside than silver. For example, analysts at Standard Chartered believe that Bitcoin will surge to $150,000 this year. Cathie Wood expects that Bitcoin wll soar to $3.8 million in the long term.
Silver price has been hindered by significant supply surpluses in the past few years. Also, the much-anticipated industrial demand has not materialized.
Therefore, while past performance is not a good indicator of the future, I believe that Bitcoin has better fundamentals than silver. As such, i suspect that the iShares Bitcoin Trust will outperform the iShares Silver Trust in the long term.
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