Posted 20th September 2023

Silver ETFs vs Digital Silver

The estimated market capitalisation of silver is over 1.3 trillion dollars.

It’s a highly sought-after investment, regardless of whether gold’s market cap is 10 times larger or not. It has a truly global impact, and unlike some investments, has intrinsic value thanks to its scarcity and utility.

As such, many seasoned and would-be investors are interested in this precious metal, and the good news is, there are several different ways to gain exposure to the value of silver as an investment. 

This article will analyse two of the most selected methods of silver investment: silver ETFs and digital silver. 

What are Silver ETFs?

Silver ETFs are exchange-traded funds (ETFs) that track the price of silver. They offer investors a way to invest in silver without having to physically own the metal. Silver ETFs are traded on exchanges just like stocks, so they can be bought and sold throughout the day.

There are two main types of silver ETFs:

  • Physically-backed silver ETFs: providers of these ETFs hold silver bullion or coins in a vault. When you buy shares of a physically-backed silver ETF, you are essentially buying a small piece of the silver that is held in the vault.
  • Silver futures ETFs: These ETFs track the price of silver futures contracts. Futures contracts are agreements to buy or sell silver at a certain price on a certain date in the future. When you buy shares of a silver futures ETF, you are essentially anticipating a forecasted future price of silver.

Silver ETFs can offer advantages such as:

  • Liquidity: Silver ETFs are traded on exchanges, so they are highly liquid and can be easily bought and sold.
  • Low cost: Silver ETFs typically have low expense ratios, which means that you keep more of your investment gains.
  • Convenience: Silver ETFs offer a convenient way to invest in silver without having to physically own the metal.

Understanding Digital Silver (Silver-Backed Crypto)

What do we mean when we say digital silver?

Digital silver is a “tokenised” representation of physical bullion that is recorded on a distributed ledger called a blockchain. This allows for the easy sending, spending, trading and storing of silver, without the drawbacks sometimes experienced when investing in physical bullion or coins.

When you purchase digital silver, for instance, Kinesis Silver (KAG), you are entitled to 1:1 allocated ownership of the underlying physical silver bullion that backs the token. You’ll also unlock additional utility for holding the asset that you wouldn’t necessarily get if you simply purchased physical silver:

  • Access to Kinesis’ innovative yield system
  • Spend fractional amounts of your silver with instant conversion to fiat at point of sale
  • Send silver to your friends and family 
  • Trade silver and access advanced trading tools and charts

The same applies to digital gold too! 

Differences Between Silver ETFs and Digital Silver

How big the difference between silver ETFs and digital silver is depends on how the investor wants to participate: digital silver can simply be held for the long-term, whilst it can also be actively traded like an ETF.

There are other differences, too:

Ownership – whilst an ETF gives you access to the historically appreciating price of silver, you won’t actually own the underlying metal that you would if you had invested in digital silver. 

Benefits – ETFs would not unlock additional utility the way owning Kinesis Silver (KAG) does.

Volatility – ETFs are generally seen as less volatile than owning a digital asset because they often contain a basket of assets, rather than an individual asset. 

Regulation – ETFs are seen as safer because they are more heavily regulated than digital assets, at this point in time.

Economic and Market Implications

Both types of investment can have a significant impact on the economic and market circumstances at any given time. Both silver ETFs and digital silver are making it easy for new investors to channel their money into the market and boost liquidity, whilst digital assets are a new and exciting way to store and transfer value online. 

The risk of investing should be considered in both cases, so do your own research before deciding which type of investment you would like to pursue. 

Risk Profiles: Comparing Volatility and Stability

Digital assets such as silver-backed crypto can enable the creation of new financial products and services, such as the aforementioned Kinesis yield system; this innovation can help create stable, dependable returns for investors, whilst helping to overcome the traditional volatility of any asset that fluctuates in price. 

Both are prone to periods of volatility especially around macroeconomic events, but are generally seen as more stable than fiat currencies, which is why precious metals are known as safe-haven, inflation-resistant assets with intrinsic value.

When investing, a common-sense procedure is to “zoom out” and view the appreciation of value an asset – or basket of assets – has enjoyed over time. Precious metals, as commodities with intrinsic value and hedges against inflation will likely continue to form popular investments.

With more and more people looking to stretch their money further as a result of the ongoing financial and banking crises, it seems unlikely that investing in general, but especially in precious metals, would suddenly fall out of favour.

Which is Right for You?

Choosing the right investment for you can be challenging, so do your own research and consider acquiring some expert help.

Digital silver like KAG can be purchased quickly and easily via the Kinesis Exchange, earning investors a yield for simply holding it in their account from day 1. 

Alex is a seasoned copywriter with over a decade of experience writing for traditional finance, web3 and other projects. With a portfolio spanning major brands such as Experian and Ataccama, as well as web3 marketing agency Zebu Digital (now Flight3 post-acquisition by Stephen Bartlett), Alex has a proven track record of delivering high-quality content that resonates with audiences.

Recently, Alex has been involved with establishing Bybit exchanges’ GameFi platform Yeeha Games’ education section, where he created educational content to onboard tech-focused audiences to web3. Alex provides valuable insights and delivers engaging content to investors and industry professionals alike.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

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