Back in the late 1970's Silver went on quite a run. One that might resemble something close to what bitcoin is currently doing.

Back in the late 1970's Silver went on quite a run.
One that might resemble something close to what bitcoin is currently doing.

Back in 1970 an ounce of silver was trading for a mere $6 an ounce, by the end of the decade it was trading at $49.50 ($112 in today's dollars).

That may not sound like that big of a move, but considering that the majority of that move actually took place in late 1979, as the price of silver was trading for around $12 at that time.

Which means that silver went up by over 4x in less than 4 months.

What caused the spike?
There were several factors at play but one of the main ones had to do with the collapse of the Bretton Woods agreement.

The agreement that pegged the US dollar to the price of gold.

On first glance one would assume this would lead to a decrease in the demand for precious metals, however, part of the reason for the breakup had to do with concerns over the amount of gold and silver countries were actually holding.

It became clear that there likely wasn't enough of the precious metals to back the amount of dollars that were floating around out there.

At a time when fundamentals might have been suggesting prices were about to go lower for precious metals, something very interesting happened...
A couple large institutions started getting short in a major way.

A couple of billionaire brothers caught wind of this and came up with a plan using margin to buy up a large portion of the silver market, forcing a short squeeze by the big institutions shorting it and cause prices to sky rocket.

As prices rose the retail sector started to pile in, driving prices skyward.

Eventually the rules on margin were changed and prices collapsed but the damage had already been done for most.

Is what's going on now with Bitcoin prices similar to what went on then?
To be honest, probably not.

I am sure there is manipulation going on with the price of bitcoin, but there is also heavy adoption taking place world wide which is the major difference.

This is very different than a short squeeze orchestrated by a few wealthy players using margin.

For that reason, the end result is like to be very different as well.

I do expect there to be a significant correction in bitcoin at some point, but I highly doubt it's chart will look anything like the chart of silver did back in 1980.

Silver ultimately started it's run at $6, ran up to about $50, and was trading back at $6 again 2 months later.

I don't see that same kind of price action on bitcoin.

Stay informed my friends.