Gold has been the number 1 safe haven asset in the past decades. It has proven to be very crisis-resistant and hence a good hedge for any equity investor. But access to gold has never been evenly distributed among the world’s population. Until now, because today, gold-based stablecoins aim to change just that.
The days you had to wait in line to buy or sell gold may soon be over. As mentioned in oir previous blog post “Why Bitcoin has Value”, Bitcoin (BTC) has already been widely heralded as the “digital gold” by various investors and industry experts. But at the same time,related innovations in blockchain technology are quietly changing our understanding of physical gold ownership. By leveraging blockchain technology, digital assets like Tether Gold (XAUT) and other gold-backed stablecoins (coins that are pegged to the value of actual gold not FIAT currency like e.g. USD) are fulfilling the economic purpose of physical gold ownership while at the same time overcoming many of the traditional challenges associated with holding gold. With a quickly growing market cap of approximately $86 million, XAUT has already eclipsed PAX Gold (PAXG) to become the most widely held and circulated gold-backed stablecoin worldwide!
This innovative concept of gold ownership combines three distinct advantages:
Direct exposure to the price of physical gold!
Cost-efficiency and accessibility of traditional financial assets, such as ETFs!
The practical and transactional utility of a digital token!
Before the age of gold-backed stablecoins, only the largest investors could avoid making a big trade-off between points 1 and 2 in the list above. Everyone wants direct exposure to the price of physical gold. But how much cost are you willing to bear? From the burden of securing physical storage and transportation to the added friction of purity-testing and low divisibility, it is easy to understand why direct exposure has become prohibitively expensive for most investors and especially if you lack practically unlimited funding (as most of us do). Unable to harness economies of scale, the small investors are then priced out of physical ownership and priced into a synthetic proxy (without any claim on physical gold).
But still, holding financial gold instruments (at least traditional derivatives and synthetic assets), is not the same thing as owning real gold. Without traceable allocation to specific, authenticated and securely vaulted physical gold, these synthetic gold-based financial products can never amount to the real thing, no matter how popular they become. But today, a powerful combination of technical innovation and legal design have enabled gold-backed stablecoins to harness economies of scale for everyone. Now, for the first time in gold’s very long-standing history, every investor (with no capital restrictions) can easily and directly gain exposure to the price of physical gold without having to overcome the traditional associated costs and obstacles. The only thing one has to do,is buying a. gold-based crypto-asset like PAX Gold or Tethre Gold! We are therefore confident to say that physical ownership has been or rather soon will be democratized thanks to blockchain technology!