There’s a reason that for thousands of years gold has enchanted mankind and retained its magic. In periods of economic uncertainty, it has been a go-to safe haven for investors. During the last financial crisis starting in 2008, the value of gold increased 148%. This spike really proved gold’s strength as a long-term hedge against market instability. After years of hanging flat, the COVID-19 pandemic led to an unexpected and sudden resurgence. While forecasters say gold will continue to perform well, it will probably not repeat its recent record high as markets start to come back.
Stablecoin titans Tether and Paxos are shaking things up in the gold world. Their new gold-backed tokens are creating a new hybrid of real world assets coming to the blockchain. With a market capitalization of almost $835 million, Tether Gold is currently the most popular gold token on the market. By contrast, Paxos Gold comes in a distant second at about $799 million.
Tether and Paxos claim that their gold-backed tokens are 100 percent backed by physical, audited gold reserves. This ensures investors a convenient digital format of the invaluable metal. These tokens provide investors the safety and stability of gold. They further provide the benefits of blockchain technology, including around-the-clock trading, almost real-time price discovery, and speedy settlements.
Gold-backed tokens Despite growth, the gold-backed token market is still small compared to the overall cryptocurrency market. Additionally, USDT’s market capitalization is currently over 100 times bigger than that of Tether Gold. This dramatic difference serves to underscore just how nascent the progress of tokenized gold really is.
Despite the lack of yield from gold-backed tokens offered by Tether and Paxos, the efficiency and accessibility of blockchain technology make them attractive to investors. Blockchain technology gives companies, such as gold miners, the ability to issue tokenized versions of their reserves. This innovation has the potential to transform the gold market.
