The crypto market is experiencing a contraction, extreme volatility, and low appeal for investors. In other words, it is under the heavy paw of "bears" - financiers taking advantage of declining asset prices and the reigning uncertainty.
Nevertheless, things are not as grim as they may seem, especially for gold-backed tokens. These assets peg their blockchain values to the real-world price of gold, among the few thriving in severe economic crises. As a result, gold-based cryptocurrencies tend to grow during a bear run, providing investors with stability and growth.
Gold-pegged tokens like AABBG, Paxos Gold, and Tether Gold are among the top gold-backed stablecoins currently prospering. They benefit from real gold reserves backing their existence and widespread community support. Furthermore, new tools, such as payment gateways, are developing to ease their way into mainstream adoption.
Soon, gold-backed tokens could become a means of exchange and payment method available to merchants worldwide. So, let's find out more about their features, utility, and long-term potential!
How Gold-Backed Tokens Can Take Center Stage
A gold-backed cryptocurrency is similar to other digital assets, such as Bitcoin or Ethereum, in that it only exists on the blockchain. Its physical representation is not available. However, contrary to the famous crypto examples, every gold-pegged token is backed by an ounce of real gold.
Companies issuing gold-backed tokens have the same amount of gold in safe storage. Generally, it is a third-party custodian ensuring the safety of those gold reserves. However, some entities prefer overseeing the gold reserves themselves.
Investing in gold-backed tokens gives you all the benefits of owning gold without worrying about all the downsides that come with it. For example, you don’t have to take care of its transportation, storage, or safety. That’s because you own the gold’s virtual representation on the blockchain.
If you wish, and most gold-backed token issuers allow it, you can retrieve the actual gold you own in tokens. However, you will have to deal with all logistics we mentioned above on your own.
A better choice is to keep the gold-backed tokens, which can remarkably thrive regardless of the market's trajectory. Gold is an investor-trusted asset that usually grows in times of economic crisis. After all, the precious metal enjoys a stellar reputation for the value it has earned over the past four millennia.
Since these tokens peg their blockchain value to gold's cost, their price will increase whenever the metal's value surges. Moreover, a gold-backed asset will rarely drop in value below the gold's real-world selling cost. As a result, it represents a viable investment with potentially high ROI in the long run and despite bear runs.
The Main Utility of Gold-Backed Tokens
Gold-pegged tokens can balance a crypto investor’s portfolio, especially during bear markets. However, this is not the only purpose of owning these assets. A gold-backed token can become a reliable form of crypto payment if merchants and customers adopt it.
According to this survey from Visa, roughly 24% of small and medium-sized businesses would accept crypto payments. This is a significant step towards the digital economy, where customers enjoy numerous payment methods, including fiat and crypto.
However, businesses and customers need a lucrative and trustworthy tool to make crypto payments happen. A reliable option could come from payment gateway applications enabling merchants and customers to use crypto as a payment method. Such an app could be a new service or a renowned payment processor expanding its online and offline payment alternatives to include digital coins.
Payment methods have diversified immensely in recent years. The advent of blockchain technology and better encryption mechanisms have given customers a wide pallet of tools to choose from when making a purchase. That’s why we can easily use an e-wallet nowadays to complete online purchases. Moreover, some merchants accept payment via email, SMS, QR codes, or social media platforms.
Cryptocurrencies, especially stablecoins, have proven their longevity in the market. And, since their value is pegged to real-world assets, they could represent viable payment options. We are only a step away before more B2C, and B2B companies accept them as payment for their products or services.
Gold-Backed Tokens Could Help Investors Resist the Bear Run
Even the worst economic crisis can provide lucrative investment opportunities. The crypto market is under a long and oppressive bear run that doesn't offer many, except probably gold-backed tokens.
During extreme volatility, stablecoins backed by reliable real-world assets like gold can help investors weather the storm. Furthermore, they could increase in value and blossom even more once the bear run ends and the bulls take over. Therefore, they are more than a temporary crotch for crypto enthusiasts.
The crypto winter is unlikely to last forever. In fact, it only seems so overbearing now because it coincides with a significant global economic crisis. Investors relying on gold-backed assets might maintain the value of their portfolios and overcome this period with marginal losses.
Gold-pegged tokens are sustainable assets with long-term profitability. They are merely steps away from reaching mainstream adoption. All they need is a real-world application using safe and reliable tools, such as payment processors. Fortunately, the day when people can use their crypto investments through gold-backed tokens to pay for products or services may not be too far into the future.
