If you’ve been watching the stock market recently, you know inflation and cryptocurrencies are top of mind. Will consumer prices keep rising? Will crypto prices tank once again? Traders can’t be sure, which makes the idea of gold-backed cryptos so appealing right now.
Gold-backed cryptos are a way to combine the best of digital currencies with a hedge against inflation. In other words, they are a way of benefitting from the precious metal while still dabbling in all things crypto.
Writing for CoinDesk about the increasing prevalence of gold-backed cryptos, Muyao Shen reported that a number of crypto analysts think the new interest makes a lot of sense. Vetle Lunde, an analyst at Arcane Research, calls the class of assets “very convenient tools for investors.” Lunde is not alone — the market capitalization for gold-backed cryptos has soared 30-fold since the start of 2020.
Without a doubt, this speaks to the growing appeal of this segment of the crypto world. And, as InvestorPlace analyst Luke Lango highlights, commodity-backed cryptos could be about to rocket. He says:
“Commodity-backed cryptos make a ton of sense in the Crypto Revolution. Basically, if enough commodity-backed cryptos exist, then we should be able to create accessibility to commodities trading through decentralized exchanges. For institutional investors, this is a good way to bypass regulations set forth by various parties like the SEC. Add in the recent inflation fears, and you have a cocktail that could lead to a nice boom in commodity-backed cryptos in the current environment.”
If you are considering investing in gold-backed cryptos, you are in luck. These three options deserve a closer look here.
Gold-Backed Cryptos: Tether Gold (XAUT-USD)
Tether (CCC:USDT-USD) might be best known for its U.S. dollar stablecoin, but Tether Gold (CCC:XAUT-USD) is also worthy of investor attention. The Tether Gold token debuted in early 2020, and is one of the most popular gold-stabilized currencies available right now.
Tether Gold seeks to harness the efficiency of converting gold to any global fiat currency, while also eliminating the issue of actually moving physical gold. The Tether Gold white paper suggests use cases like inclusion in a portfolio as a hedge against financial instability.
Much like USDT, the value of XAUT is protected by a physical vault containing the underlying assets of Tether Gold. Tether holds a U.S. dollar for every USDT token in circulation. Similarly, every XAUT has backing from its own ounce of gold.
Tether Gold might be one of the best bets in terms of brand recognition. But, its problem lies in its exchange reach. Currently, there are only a few exchanges through which you can buy XAUT. Bitfinex, BTSE and FTX are your only bets for buying the token. And while these aren’t minuscule exchanges, they are not hugely popular in the U.S.
PAX Gold (PAXG-USD)
PAX Gold (CCC:PAXG-USD) is another gold-backed crypto supported by a well-known stablecoin. The token is the product of Charles Cascarilla, the founder of Paxos Standard (CCC:PAX-USD), another token tied to the U.S. dollar.
PAXG might be the first gold-backed crypto to exist. The crypto was launched in late 2019, and is one of the most popular gold-backed digital currencies, alongside Tether Gold. Where PAX Gold edges out XAUT, though, is in its exchange support.
PAXG is available for purchase on some of the largest exchanges in the world. Binance, Kraken and Uniswap all carry PAXG. The currency also benefits from being built entirely on the Ethereum (CCC:ETH-USD) network, meaning it is standardized by the ERC-20 token model and can therefore be sold on a huge number of other exchanges.
The drawback with the currency also comes from its proofing algorithm. The PAXG token uses proof-of-work currently, which is known for being energy intensive. However, with Ethereum working to switch to the less-consumptive proof-of-stake model, all will be well soon.
Gold-Backed Cryptos: Asia Broadband (AABB)
Asia Broadband (OTCMKTS:AABB) is a very popular — and speculative — play in the mining industry. It is also behind one of the newest gold-backed cryptos, AABB Gold (CCC:AABBG-USD).
AABB is a company that is incredibly familiar with rebranding, pivoting from digital media to education to mining. Recently, the company began its move into the cryptocurrency space. The company is now combining its mining business with its crypto business to whip up a gold-backed crypto.
The company is supporting this token with its own gold from mines in both Asia and Mexico. It is already seeing success, with investors trading $1 million in AABBG since the spring. Unlike previous plays, AABBG not exactly a stablecoin. The token represents one-tenth of a gram of gold rather than a full ounce. This makes it significantly cheaper.
AABBG may be incredibly popular right now. However, it doesn’t come without its drawbacks. Right now, the only way to purchase AABBG is to use Asia Broadband’s exchange.
This issue will be made less glaring in the fall, when the company plans on releasing its proprietary exchange. The expanded app will allow users to more quickly move around their AABBG and convert it to other fiats.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
