The cryptocurrency market has seen some major disruptions since early 2018. With stricter rules and closer scrutiny, the trade of digital assets is growing at a more stabilized pace. Popular cryptocurrencies, such as Bitcoin and Ethereum, have seen their values drop as investors have become increasingly concerned about their reliance on peer-to-peer computer transfers and a lack of physical backing. These shortcomings have prompted the cryptocurrency community to innovate, creating new digital assets that avoid the volatility inherent in cryptocurrency trading. One of these new asset classes is gold-backed cryptocurrencies.
Asset-backed cryptocurrencies, or stablecoins, are digital tokens whose values are tethered to a tangible holding. This could be a currency like the U.S. dollar, another digital currency, or an exchange-traded commodity, such as gold. While these hybrid assets are less attractive to risk-hungry investors, they are more stable and experience far less volatility which makes them ideal investments for periods of economic uncertainty.
Today, the majority of stablecoins on the market are dollar-backed assets. USD tethered tokens currently account for 75% of stablecoins’ values, but the market for gold-backed coins is rapidly expanding.
Gold has always been seen as a safe haven in investing. Its stability and value outside of fiat currencies have made it an investor favourite in times of financial turmoil and economic downturns.
The Motley Fool highlights that 90% of the demand for gold is based on its intrinsic value. This is why as part of a larger, diversified investment plan, gold provides value even as other assets struggle. Gold remains strong through economic cycles, as its sheer liquidity is such that anywhere you go, its values is recognized. As the shadow of financial uncertainty continues to grip investor sentiment this year and into 2020, gold-linked assets will continue to grow in demand.
In the case of gold-backed cryptocurrencies, their minimum value will always be pegged to current gold prices. As a coin is equivalent to a gram of gold, your investments will remain valuable even if your gold-backed cryptocurrency fails to take off and capture greater market share. On the other hand, if your gold-backed stablecoin climbs in value, it can far exceed the price of gold, making it both a safe financial haven and a speculative investment.
Popular Gold-Backed Cryptocurrencies
If you are thinking about investing in gold-backed cryptocurrencies, here are some of the most traded gold-backed stablecoins available:
DGX Token – The Digix gold token was launched last year and is now the most popular gold-backed cryptocurrency on the market. The DGX token was developed by Singapore-based DigixDAO and since its launch, has doubled its gold holdings. As it’s tokenized gold, investors can withdraw their tokens with the equivalent amount in gold. DGX can be traded in Kryptono, Ethfinex and Kyber Network among others.
OGC Coin – UAE based OneGram is a sharia-compliant digital asset popular in the Middle East. Gold trading platform GoldGuard is just one backer behind this gold-backed cryptocurrency. Seventy percent of OGC’s revenues are invested into additional gold shares, adding to its value.
ZGC Coin – Chinese ZenGold coin is the first tokenized gold launched in the Metaverse blockchain. This blockchain is considered in close competition to Ethereum and NEO as an environment to develop dApps and smart contracts. Similar to others on this list, one ZGC coin is equivalent to a gram of gold currently being stored at the Shanghai Gold Exchange Vault.
PAX Gold Coin – Lastly, New York-based asset manager Paxos recently launched its own gold-backed cryptocurrency Pax Gold. The stablecoin issuer highlights that PAXG coins can be exchanged for a gram of gold in trusted institutions like Bullion Exchanges in New York.
As the cryptocurrency market matures, stablecoins are enjoying a much more noticeable presence in the digital asset world. New investors seeking to enter the crypto market with reduced risk would be wise to consider gold-backed cryptocurrencies as a way to stabilize their portfolios and as a safe haven in case of severe market downturns. With big players swooping into the stablecoin market like Paxos and OGC, the popularity of gold-backed cryptocurrencies will undoubtedly continue to grow.
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As with any asset, investing in cryptocurrencies involves the risk of substantial loss, including the loss of your entire investment. SolidTrust Pay is not an investment advisor or fiduciary and this content is provided for informational purposes only. Before purchasing cryptocurrency, please evaluate whether the investment is suitable for your financial situation and personal risk tolerance.