Are gold-linked cryptocurrencies worth investing in?
Investors and retirees who want to store their wealth for the long term have started buy gold coins, because they retain their value better than fiat currencies. However, some people want to invest in gold but are also interested in cryptocurrency. This led to the development of cryptocurrencies pegged to the price of gold, called gold stablecoins.
In the cryptocurrency space, stablecoins are digital currencies whose prices are pegged to the prices of other assets. These stablecoins have stable 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 tied to a different type and size of gold bullion. An example is gold tie, whose price is pegged to a fine troy ounce of gold, and DigixGlobal, which costs the same as one gram of gold. Investing in such stablecoins is like buying gold coins in the market. However, it is more convenient and eliminates the hassle of storing physical gold coins. Keeping gold coins can be a security risk, and if stolen, your investment is lost forever.
Gold stablecoins are held on an exchange and backed by real gold, making them a safe investment option. They also have the same potential for value growth as real-world gold. It should be noted that gold stablecoins serve almost no purpose outside of being a convenient way to hold gold investments. They are not like physical gold coins which can be used to transact in rare cases. Investors in gold stablecoins should sell them on the exchange before spending their money. However, this is unlikely to be a problem as these stablecoins are in high demand. And Tether Gold having a market cap of over $450 million in 2022 is proof of that.
Investing in gold stablecoins has advantages such as fast transaction speeds, no buy and sell limits, and the ability to sell across international borders. However, this type of investment has some drawbacks.
The most obvious downside is that the cryptocurrency market has little to no regulation. Exchanges that are not audited by government authorities are free to act in their best interests. Nor is there an infinite amount of gold in the real world. This results in a limit on the number of gold-backed stablecoins, but there is no indication that this will be a problem in the future.
Investing in gold stablecoins is a great alternative to buying gold coins in the real world. It is also more convenient as there will be no hassle of storing physical coins. Gold stablecoins are also worth investing in as their prices are stable and match the cost of gold in the real world. Their transactions are faster and can be completed across international borders in minutes.
These benefits still don’t 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 stable gold coin on an exchange.
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