What Is A Gold-Backed Cryptocurrency
A gold-backed cryptocurrency is a digital derivative asset whose value is supposedly underwritten by the equivalent price in gold. A gold-backed cryptocurrency gives its tokens a certain quantity of gold, implying that its value is stored in the reserves of a trustworthy custodian as tangible collateralized assets.
Some gold-backed tokens even allow for the redemption of the tokens back for gold. Unlike most cryptocurrencies with theoretical value, a gold-backed token’s value is tied to a tangible asset, which cushions it against severe price fluctuations.
In 2021, Bitcoin and Ethereum have been the market leaders, posting record highs for investors. But then came the crash just immediately. Elon Musk tweeted about something, plus China promises increased regulation. This kind of volatility attracts recreational investors who see big risks as the natural result of even bigger gains. But investors are still wary of commitment.
Historically, gold has been a protective hedge against inflation. Experts like Timothy Ord, president, and editor of The Ord Oracle, predict that gold stocks could see 10X gains in the next three years. In addition, Wall Street gold estimates are bullish for 2021, and gold is expected to increase in value.
This innovation comes at a time when investors have been searching for safe-havens. They’re facing massive amounts of liquidity in the economy, created by government stimuli designed to shield the economy from the impact of the pandemic.
Tether offers a more stable crypto investment, protected from the bigger crypto market swings. Still, even fiat currency-backed cryptos are vulnerable to potential inflation, and investors are wary of how that can impact the currency’s buying power over time.
Gold-Backed Cryptocurrency Example
Justin is a crypto trader on Binance, and he is sure of protection. As soon as Paxos-Gold (PAXG) was introduced into the app for trading, he was smart enough to register and buy some gold so he could transact. According to him, he’s not confident in trading cryptocurrency anymore due to his loss in the recent BTC deep, so he has to increase his chance and income stability, so he went for gold.« Back to Glossary Index