In our latest forecasts we made the point that crypto should become an attractive asset class in 2023 (crypto predictions). What we also concluded from our silver forecast is that silver looks really good as a long term investment. We believe that crypto will move substantially higher in 2023. Similarly, silver is set to rise to its secular breakout level. As we continue our research, we could find this strong correlation between both markets. Particularly, our two favorite investments, XRP and silver, seem to be highly and strongly correlated.
We wrote an analysis for our friends at TalkMarkets that is worth your time: Should Investors Choose Precious Metals Or Crypto In 2023. The article concludes that precious metals and crypto have similar drivers, i.e. inflation expectations which inversely correlated with the USD.
The point we have made repeatedly is that the U.S. Dollar has been the driver of bearish price action in markets in 2022. In fact, the USD has been the market that had the most reliable uptrend. While the lithium price and many lithium stocks did really well, it has been a choppy ride.
The USD is inversely correlated to inflation expectations.
For crypto markets to do well, they need a stabilization in the USD, ideally a downtrend. This is what we wrote in our article that appeared on TalkMarkets:
While we don’t expect a downtrend in the USD in 2022, we can reasonably expect that 2023 will come with lower USD readings. This will be the ultimate trigger for BTC and crypto markets to move higher.
Rising inflation expectations will push markets, metals and crypto higher, although not necessarily at the same time and the same pace.
But if we look at a comparison between one of our favorite crypto coins, XRP, and our favorite precious metal, silver, we see a surprisingly strong correlation.
Below is the XRP chart (first pane) and the price of silver (second pane). Since 2021, both XRP and silver are really strongly correlated.
That’s why we concluded that, “in a way, betting on silver or XRP is somehow similar, directionally. Maybe it’s a good idea to accumulate a bit of both before 2022 concludes.”
As part of a diversified portfolio it might make sense to consider both XRP and silver. The way to think of them is that they are leveraged plays on inflation expectations.
