Cryptocurrencies backed by assets like precious metals have proven to be popular in 2020. Investors uncomfortable with stomaching a volatile cryptocurrency market often turn to stablecoins to protect investments and hedge against sharp market declines.
The concept of backing cryptocurrencies with assets like gold and silver is nothing new.
Back in 2018, the Perth Mint announced the development of a gold-backed cryptocurrency to foster investment in precious metals. Australia’s biggest gold refiner said the decision to create a digital currency came as the Mint noticed a heightened interest in alternative investments.
Fiat-based stablecoins still continue to dominate the market. Some crypto projects are launching gold-backed cryptocurrencies to try and capitalize on the bullion’s high price.
But a number of silver-backed cryptocurrencies are making their way into the market. Options like SilverCoin.com and Silverlink allow investors to invest digitally into the ‘yellow metal’s’ sidekick.
The Allure Of Silver
Silver often gets ignored as an ounce of the precious metal trades far below that of gold. But the asset is gaining steam in investment circles. Buyers are noticing the metal’s low price and are purchasing silver due to a belief the spot price is still low relative to where gold trades at.
Ultra-low interest rates help increase the price of silver as the metal functions as both an investment and as a metal used in the industry.
Cryptocurrencies backed by silver have gained attention because at minimum, the coin will be equal with the spot price of the metal. If the coin proves to be popular, the cryptocurrency’s price could rise above spot. This factor comes into play more for coins backed by silver than for ones backed by gold.
The reason? CEO of U.S. Global Investors Frank Holmes explains silver is actually about 1.5 times more volatile than gold due to its lower price and its wide variety of use cases.
Investors in silver-backed cryptocurrency have the opportunity to capitalize on volatility and invest in silver-backed coins that, if popular, could reap strong returns on investment as they rise above (a surging) spot price.
Keep reading for a list of the top three silver-backed cryptocurrencies.
- SilverCoin: SilverCoin’s fractionalized nature, security measures, and inclusive nature make the silver-backed cryptocurrency a leading option for investors. As the first fractionalized silver-backed asset available to purchase with other virtual currencies or fiat. No identification is required to purchase SilverCoin, as all investors need is an Ethereum wallet address to receive the crypto.
The SilverCoin team provides a live stream for investors to view stored physical silver bullion backing the coins in real-time, and publishes reports of audits on the website for easy access. SilverCoin’s security measures also include two-factor authentication upon login to reduce the risk of a hack. All SilverCoin investors can redeem for 99.9% silver bullion at any time.
- Silverlink: The Silverlink token (LKNS) is equal to one gram of 0.999 certified silver. Built on the Ethereum network, the concept behind the coin allows investors to buy digital silver as easily as any other cryptocurrency.
When an order is placed on the Silverlink website, physical bullion is acquired at the lowest spot price across markets in Australia. China, Peru, Russia, Mexico, and Chile. Once proof of ownership is established, and a vault receipt is received, a LKNS token is then mined via a smart contract. Tokens are available to be bought, traded, or held inside an ERC-20 compatible wallet.
The fixed fee levied on every LKNS order will go to holders of Link’s LNK token, offered on the Link Platform.
- SilverToken: Each SilverToken represents direct ownership of silver at a 1:1 rate with an ounce of investment-grade bullion. The coin’s creators only hold 99.9% silver and abide by the standards set by the London Bullion Market Association.
Holders can either have their silver-backed cryptocurrency converted to physical bullion and mailed, or they are able to sell coins back to SilverToken. Buy-back requires a minimum of 100 SilverTokens. SilverToken has also created the SilverDollar (SLVD), which is always $1.
The coin is able to be used for daily purchases of goods and services. The SilverToken team says the stable value of SilverDollar makes it easy to understand the purchasing power of the digital currency.
Cryptocurrencies Backed By Assets Prove Popular
Cryptocurrencies with a basis in physical assets only grow in popularity. Gold-backed cryptos are proving to be useful in Islamic nations as they are perceived to be compliant with Sharia law. The Islamic faith largely believers that economic activity should not hinge on speculation.
Silver-backed cryptocurrencies look set to grow in influence as the market for stablecoins increases. The three cryptocurrencies listed above are some of the current industry leaders.