{"id":310567,"date":"2021-11-09T10:23:43","date_gmt":"2021-11-09T15:23:43","guid":{"rendered":"https:\/\/insidebitcoins.com\/?p=310567"},"modified":"2021-11-09T10:24:06","modified_gmt":"2021-11-09T15:24:06","slug":"investing-in-cryptos-backed-by-gold","status":"publish","type":"post","link":"https:\/\/insidebitcoins.com\/news\/investing-in-cryptos-backed-by-gold","title":{"rendered":"Cryptos Backed by Gold Unlock Next Wave of Innovation Across the Investment Landscape"},"content":{"rendered":"

Bitcoin and Ethereum have been leading the crypto market rally in 2021, bringing huge profits to investors. But that all changed when Elon Musk posted a tweet merely hinting that he\u2019s fallen out of love with the world\u2019s top digital currency. On top of that, China\u2019s central bank announced that all transactions involving cryptocurrencies are illegal and banned digital tokens like Bitcoin.<\/p>\n

As expected, investors have started to look at other cryptos. The upside is that the field of cryptocurrencies is constantly expanding, and the next great digital token may have already been released.<\/p>\n

Cryptos backed by gold are becoming increasingly appealing for investors looking forward to hedging against investment risk. Gold-backed cryptocurrency<\/a> is backed by 100 percent physical gold. To put it simply, the value of the digital asset is underwritten by the equivalent price in gold. The digital currencies hold a more stable value.<\/p>\n

This new class of digital tokens provides the best of both worlds \u2013 gold and cryptocurrencies. Several gold-based cryptocurrencies have gained attention in recent years, yet they offer unrealistic promises, not to mention that some of the projects aren\u2019t even backed by gold.<\/p>\n

Precious Metals Like Gold Have Always Been Key Commodities in The Trade Market<\/h2>\n

The role of gold in the monetary system is limited by the scarce availability worldwide. Gold is in short supply, so it can\u2019t be used as a means of transaction, such as coins. Nonetheless, it can be traded. Speculators, funds, and investors buy and sell gold at a fixed exchange rate. At present, gold is part of most central banks\u2019 foreign exchange reserves, although its share has steadily declined.<\/p>\n

Currencies are defined in relation to a certain amount of gold. Therefore, they can be converted at home or abroad into a fixed amount of gold per unit of currency. Exchange rates between countries are fixed.<\/p>\n

Gold represents an effective commodity investment because it tends to do well in reflationary periods. It outperforms other equities and bonds. Volatility increased across major assets and commodities in 2020 because of uncertainty brought about by the COVID-19 pandemic, but gold was largely unaffected.<\/p>\n

As an investment asset, gold has performed exceptionally well in the last years. It\u2019s a multi-faceted asset that enjoys diverse supply and demand dynamics. There\u2019s no better time than now to invest. The health crisis continues to push the price of precious metals higher. The experts at Goldman Sachs expect<\/a> gold to soar throughout 2021.<\/p>\n

Developers Have Had an Interest in Creating a Gold-Backed Digital Currency Since Forever<\/h2>\n

Since the dawn of cryptocurrency trading, developers have bent over backward to create an electronic form of money that\u2019s backed by gold reserves held in private vaults. The question now is: Why?\u00a0 Well, the baseline (that is, the minimum value) of the digital token is the same as the fixed amount of gold.<\/p>\n

This, in turn, ensures protection against a sudden drop in value. Volatility is eliminated, so it doesn\u2019t affect the portfolio. There are several other differentiators between gold and other commodities, as follows:<\/p>\n