The world is struggling with one of the biggest financial crises in recent history, and so is the crypto market. We can see most of the digital assets alternating between highs and lows. As always, the uncertainty of the time we live in makes investors look for reliable assets to stabilize their portfolios. One common answer to their need are gold-backed tokens.
We have already talked about some of the most populargold-backed tokens. The question is, are they really enough to help investors fight the high volatility of the crypto market?
It is not a surprise that during such times of confusion, everyone is looking for a safe place. The economic crisis makes people return to well-known assets. As we know, gold has been an investment asset for thousands of years. It remains a predictable bearing during hard economic times and is even able to help crypto investors save their investments.
Why gold?
As we know, the cryptocurrency market has risen in the past few years, and some of the biggest assets like Ethereum and Bitcoin have even surpassed the predictions. The result was investors building substantial portfolios in a short period of time.
However, nothing lasts forever. The cryptocurrency market recorded around 70% in pullbacks. Many investors lost a significant part of their investments, and some even lost everything.
And while the crypto market is going to bounce back at some point, many investors started looking for more reliable assets.
In the last two years, the price of gold was also steadily growing. Of course, people are used to its reliability, so this wasn't breaking news.
If we look back in time, we will see that gold has been used as an asset for overcoming inflation. Today, many investors dropped their cryptocurrency investments and redirected their funds towards the precious metal. Well, that might not be necessary, as there are crypto assets pegged to gold, able to provide the best of both worlds. That way, investors can stay in the crypto market, without worrying about its high volatility.
How can gold fight against the crypto market volatility?
While there are many Bitcoin opponents, saying that it is not reliable, as it does not have tangible value in the real world, they can not say the same about gold-backed cryptocurrencies.
Gold-backed tokens use the real-world value of gold to maintain their steady price course. Every gold-backed token is backed by a real piece of gold, kept safe in a storage in an unknown location.
Simply said, owning gold-backed tokens is identical to owning real-life gold. What’s best here is that you don’t have to worry about its storage or logistics. Moreover, gold is a regulated asset, which helps it deal much better with inflation.
We can definitely say that gold-backed cryptos are a step forward in gold-trading evolution, as they combine the worldwide-accepted asset with the modern blockchain technology.
And while inflation is spreading over most financial markets, including the stock and the crypto market, fiat currencies like USD and EURO are weakening, indicating the growing value of gold.
Gold-backed tokens provide investors a strong asset they can buy and hold. Even if they may not see the physical asset, they can be sure they hold an undisputable value by owning the virtual representation.
As a conclusion, we can say that gold-backed cryptocurrencies can bring new investors to the market and keep them there despite volatility and hard economic times.