Are Cryptocurrencies Pegged to Gold Worth Investing In?

Investors and retirees that want to store wealth long-term have started buying gold coins, as they retain value better than fiat currencies. However, some people want to invest in gold but are also interested in cryptocurrency. This has led to the development of cryptocurrencies pegged to the price of gold, called gold stablecoins.

In the cryptocurrency space, stablecoins are digital currencies that have their prices pegged to the prices of other assets. These stablecoins have steady prices and are resistant to market fluctuations. The most popular stablecoin in the market is Tether (USDT), which is pegged to the price of the US dollar.

Investing in Gold Stablecoins

There are different gold stablecoins on the market, each pegged to a different type and size of gold bar. One example is Tether Gold, whose price is pegged to one troy fine ounce of gold, and DigixGlobal, which costs the same as one gram of gold. Investing in such stablecoins is similar to buying gold coins on the market. However, it is more convenient and eliminates the hassle of storing physical gold coins. Keeping gold coins might be a security risk, and if they are stolen, your investment is gone forever.

Gold stablecoins are held on exchanges and backed by real gold, making them a safe investment option. They also have the same value growth potential as gold in the real world. It is worth noting that gold stablecoins have almost no utility apart from being a convenient way to hold gold investments. They are not like physical gold coins that can be used to transact in some rare cases. Gold stablecoin investors would need to sell them on exchanges before spending their money. However, this is unlikely to be a problem because these stablecoins are in high demand. And Tether Gold having a 2022 market cap of over $450 million is proof of this.

Investing in gold stablecoins has benefits like fast transaction speeds, no purchase and sale limits, and the ability to sell across international borders. However, there are some downsides to this kind of investment. 

The most obvious disadvantage is that the cryptocurrency market has little to no regulations guiding it. Exchanges that are not audited by government authorities are free to act in their best interests. There is also not an infinite amount of gold in the real world. This translates to a limit on the number of stablecoins backed by gold, but there is no sign that this will be an issue in the future. 

Endnote

Investing in gold stablecoins is an excellent alternative to buying gold coins in the real world. It is also more convenient because there will be no hassle of storing physical coins. Gold stablecoins are also worth investing in because their prices are stable and correspond to the cost of gold in the real world. Their transactions are faster and can be done across international borders in minutes. 

These benefits still do not take away the importance of buying gold coins in real life or having a Gold IRA. This is because stablecoins are stored on exchanges, which the government does not yet regulate. Having physical gold coins gives the owner more freedom and ease than holding a gold stablecoin on an exchange.