Understanding Gold-Backed Cryptocurrency & its Role in Trading

The gold standard was a part of the global economy for nearly half a century. The United Kingdom introduced it in 1861. Back then, countries used to secure their currency against this precious yellow metal. However, the system couldn’t work for fiat currencies for a long time due to many reasons.

But now, the gold standard seems to be coming back with cryptocurrencies. That’s right, a large number of cryptocurrencies are now being underpinned by gold. Again, there are many reasons leading to this event. From the investors’ perspective, it’s important to gain a complete understanding of it. So let’s delve deeper and see what’s giving a push to these crypto variants.

Exploring Gold-Backed Cryptocurrencies

Lots of changes are happening in the global economy leading to different outcomes. In order to reduce dependency on the US dollar, many nations are finding alternatives. Reportedly, Russia and Iran are jointly working on a gold-backed crypto project for international payments. 

The world knows that both countries have struggled to fund their military and economic endeavors lately. Notably, they aren’t the only countries trying to wean off the greenback. There are various other developing countries trying to do the same. But how do gold-backed cryptos fit into this picture? Well, gold gives more stability to the volatile crypto. 

Gold is a stable asset with a strong intrinsic value. When this metal supports digital assets, the latter becomes more reliable for usage. The yellow metal also brings more liquidity into cryptos and makes them more valuable. Moreover, they provide protection against inflation and make investments more fruitful.

As a result, several gold-back cryptos have emerged lately. Crypto investors must know a few of them to strengthen their portfolios.

Gold-Backed Cryptocurrencies For Investment

These assets have gained huge traction from the market owing to their uniqueness. It gives them better surety of profits and security too.

Tether Gold (XAUt)

The project belongs to Tether stablecoin, a name that many crypto users are familiar with. While the stablecoin is pegged against the dollar, Tether Gold is secured with gold. By owning this token, the holder is entitled to specific gold bars too. 

Each token represents the allotted gold with its unique serial number and other specific details. The token holders can check the information of gold bars they own on the website.

DigixGlobal (DGX)

DigixGlobal makes gold investment easier by bringing blockchain into it. It allows them to buy this precious metal with lesser means and money. To make this possible, the project has introduced fractional tokens that can be transferred and redeemed. 

With DigixGlobal, traders can invest in a very small amount of gold. Furthermore, it allows them to manage their share very effectively. In addition, it lets you buy gold ETFs while making the token tradable on exchanges. 

Paxos Gold (PAXG)

Paxos, the company behind Singaporean crypto exchange itBit has introduced this project. Paxos is legally recognized by the New York State Department of Financial Services. It makes their projects and products more reliable to crypto users across the globe.

PAXG is an ERC-20 token that accesses gold from traditional markets via crypto. It makes the storage, speculation, and trading of gold much easier than regular marketplaces. Above all, the holders can treat Paxos Gold as futures.  

GoldCoin (GLC)

GoldCoin aims to bring more economic freedom while combining the precious metal with a peer-to-peer system. Following the ERC-20 standard, the token’s backing is at a ratio of 1000 GoldCoin/ounce of gold. Its confirmation speed of 2 minutes has impressed several digital asset users.

Focusing more on functionality, it makes the tokens more divisible while giving the attributes of physical gold. The users can redeem them back into physical gold or fiat whenever they want. They can also trade them at many exchanges and on the company’s website. 

Perth Mint Gold Token (PMGT)

This project is directly associated with Australia’s Perth Mint’s central bank. Each Perth Mint Gold Token bears the GoldPass certificate at a ratio of 1:1.  The divisible and transferable tokens are redeemable against physical gold or fiat. Also, users won’t have to pay any fee for exchanging the tokens.

They enjoy high liquidity even on the biggest trades. The users can redeem tokens on the over-the-counter gold market XAU too. 

Upshot

The union of gold and digitization could be a boon for the global economy. Nevertheless, it would be too soon to expect such results from this blended asset. Economists and analysts are observing its development closely. In the next few years, the picture will be clearer about the gold-backed cryptocurrency. 

Till then, it’s advised to evaluate it and then make investments. 

Mr. Pratik chadhokar is an Indian Forex, Cryptocurrencies and Financial Market Advisor and analyst with a background in IT and Financial market Strategist. He specialises in market strategies and technical analysis and has spent over a year as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the Financial markets.