Welcome back to our weekly mailbag edition of Inside Wall Street with Nomi Prins.

That’s where, every Friday, we put your questions to Nomi and her team of experts.

First up this week, reader Carl N. has an important question about Bitcoin, following Nomi’s essay on why both Bitcoin and gold belong in your portfolio

Nomi, I would like you to comment on what happens to Bitcoin when the last coin is mined. Will the gigantic mining computers be used to process the daily Bitcoin transactions? Are they doing that now, or are they exclusively used for mining? Who maintains the decentralized Bitcoin transactions now?

– Carl N.

Nomi’s response: Hi Carl, thank you for those questions. They are quite critical to the path that Bitcoin and mining can take.

Yes, once mining of new bitcoins is completed, miners and their computers will turn to facilitating transactions. That means these miners will earn income from transactions rather than rewards for mining Bitcoin. 

At the moment, some miners do both – mine new bitcoin and process transactions. In addition, one new trend that I can see gaining traction is DeFi (Decentralized Finance). DeFi applications make the transaction process less time- and energy-consuming, and more efficient for users.

I know several people in the Bitcoin space working on such applications, to make the process easier for small-business owners and their customers to transact at low fees. I’m watching this space to see how it progresses. More on that to come in future issues!

Meanwhile, reader John R. had a different take on Nomi’s essay. He’s not so keen on the idea of Bitcoin being on par with gold…

Gold and silver are the only full-fledged monies in the world, and they are also (for that reason) the only monies recognized and authorized by the U.S. Federal Constitution, which also explicitly prohibits states from recognizing anything else as money.

The demand for Bitcoin isn’t widespread enough that the average man in the street is ready, or even able, to accept it as a currency, and it is far too volatile to be considered a long-term store of value. Indeed, it’s highly unlikely that it will even be around in 10 years – at least in its present form.

All Bitcoin is, is a Ponzi scheme that looks a lot more attractive than holding fiat, as long as its price is going up. But that could be said of any of the other financial entities, all of which are in a massive, fiat-driven bubble.

When these Ponzi schemes collapse, as they all do sooner or later, and the world financial system collapses with it, many widely desired commodities will function as currencies amidst the collapse (e.g. food, booze, tobacco, bullets, medicine). But only gold and silver will hold (and increase) their value sufficiently.

– John R.

Nomi’s response: Hi John, thank you for your message. You’ve pinpointed some important points here.

First off, I agree that gold and silver are the only forms of money whose exchange value comes from their use, wealth storage, and historic acceptance as having value.

I’m a proponent of having some level of a gold standard resurrected, as I touched on last Friday. I think it would stabilize this massive money creation system we’ve seen since the financial crisis, and even to a smaller extent, before that. 

Every year, I buy my nieces and nephews real silver coins for their birthdays, and we talk about the history of these precious metals. My niece has started her own jewelry-making home business, making gold and silver earrings.

I think we agree that the mutual benefit of gold, silver, and bitcoin is that none of them are fiat currencies, and they have scarcity components, even if for different reasons.

I believe that bitcoin came out of people wanting an alternative to the fiat monetary system. Some have become wildly rich in the process. But mostly, the appeal of bitcoin as a lasting fiat alternative is predicated on people being able to use it and feel secure about using it. This is an ongoing development situation. 

In the limit, if all fiat systems fail, it may be that bitcoin does, too. Or it may be that bitcoin stays because it’s outside that system, depending on how things all work out. In that case, physical assets will hold – and increase – in value, which is why I believe in holding them. 

Yet, as long as the battle against fiat currencies is ongoing, even if approaching a collapse at some point, the evolution of Bitcoin has staying power – especially if its volatility stabilizes.

Moving on, kind words from reader Michael S., after Nomi showed us how to profit from the record-breaking mergers and acquisitions (M&A) trend

Congrats to Nomi. I hope she has great success with her newsletter. I sure enjoyed reading it today!

– Michael S.

Nomi’s response: Thanks so much, Michael! The most important thing to me is making sure that my writing and analysis is sound and helps readers like yourself. I’m glad you enjoyed this piece.

And finally, we turn it over to Lau Vegys – one of Nomi’s regular contributing editors, and a precious metals expert – for a question on silver…

I would ask Lau to comment on the amount of silver currently used in the manufacturing of solar panels. Will this increasing use over time strengthen demand for this commodity?

– Colin W.

Lau’s response: Hi Colin, thank you for the question. We don’t yet have the numbers for last year, but silver demand from the photovoltaics (PV) industry was around 101 million ounces (or 3,142 tonnes) in 2020. That accounted for about 11% of silver’s demand that year.

To see where we may go next from here, we need to consider two dynamics: silver thrifting in PV panels, and solar power generation growth around the world.

What do I mean by silver thrifting? Pundits have long said that silver demand from solar should start waning. This, they claimed, would happen as manufacturers continue to find ways to use less of the highly conductive – but relatively expensive – metal in their solar cells.

But while attempts at silver thrifting in PV panels have been ongoing for some time, this hasn’t really happened yet.

Consider this: In the early 2000s, silver demand from the solar sector barely registered, making up less than 1% of silver demand. In 2019, the PV industry was responsible for 10% of total silver demand, with 98.7 million ounces consumed.

And photovoltaics aren’t going anywhere. Far from it. I expect solar power generation to do very well going forward. That’s because PV-generated power is a critical technology in tackling long-term climate goals set by the governments worldwide.

So, while cost pressures (depending where the silver price is at that time) will likely continue to weigh on the silver content in panels out to 2024, overall demand from the solar sector for silver should only strengthen.

In fact, analysts at Heraus Precious Metals (which provides precious metals services and products) forecast PV installations to exceed 200 gigawatts for the first time on record by 2022. (For context, 1 gigawatt alone can power 750,000 homes.) At 200 gigawatts, Heraus estimates silver consumption would move closer to about 140 million ounces. That’s quite a bit of growth relative to where we are now.

And that’s all for this week’s mailbag edition. Do you have a question we didn’t get to today?

Write us at [email protected], and we’ll put it to Nomi and the team for next week.



Maria Bonaventura
Senior Managing Editor, Inside Wall Street with Nomi Prins

Like what you’re reading? Send your thoughts to [email protected].