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Precious metals and crypto may have similar traits and value propositions. Bitcoin is often called the “new gold“, so perhaps ethereum is the new copper.
While listening to the Behind The Markets podcast this morning, I became more convinced of the possible correlations we can draw between metals and digital assets. The guest, Dan Russo, spoke about how he invests in gold for various reasons, but closely watches copper. While gold is the precious metal that people collect and use as a hedge on inflation, copper is what gets used daily. Copper is in all sorts of things that we use. It is used in our computers, engines, wires, construction, and machinery. You can find copper powering our economy and things that we need and use.
Russo also mentioned how he watches the relationship between copper and gold. Copper has under performed gold over the past 2 years but recently has outperformed gold. He was saying that this bodes well for the markets and believes is shows we might be at the start of a bull market. Because copper is a barometer of the economy and demand for many different products and goods.
Demand for copper is highly sensitive to changes in global economic activity, perhaps ethereum will act in a similar manner in the future. If all sorts of crypto related products and apps are running on ETH, maybe ethereum will become some sort of bellwether for crypto, prices, and even the economy. Of course, we are not at that point yet. I am just thinking of what the future could hold if we keep adopting and using these digital assets, and they become a part of our daily lives.
So perhaps we can draw this new comparison of ethereum and copper. ETH is still lagging the price point of BTC when you look back at 2017. When bitcoin was around $20k, ethereum was around $1500. Currently BTC is back near that high, but ETH is only around $600. So it is lagging, and a rally is to come, similar to copper catching up to gold. Of course, other things are at play, like ethereum forking and becoming proof of stake.
Paul Tudor Jones, who recently came out in favor of Bitcoin, also has drawn some comparisons to crypto and metals. He mentioned bitcoin being the “precious metal” like gold, and the other cryptos, like ethereum, being similar to the other more industrial metals.
I have always been a believer in ethereum and do think it is undervalued. As ETH becomes deflationary and continues to be a popular choice for developers, the price should continue to go up, perhaps significantly.
To sum up, I think we can possibly draw the comparison, even if it is just a loose correlation. We can play out some of these future relationships. Bitcoin being the gold, and ethereum being the copper. This could be one story that makes sense. Especially when trying to explain these new assets and getting people to understand what they do, and how they work.
As always, this article is just my opinion. This is not advice. Do your own research.
Please leave any thought or comments below. I read them all and appreciate the messages and feedback.