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Instead of the gold stores being held by a private company, all gold purchased at PMGT is traded and stored at The Perth Mint. Perth Mint Gold Token (PMGT) is one of the few cryptocurrencies validated by a government. To compile our list of the most popular gold-pegged tokens, we evaluated the company that created the token, the current market cap, and the unique features of each project. Gold-pegged tokens are a steady asset for those seeking stability in their digital portfolio. Digital assets pose new inherent risks that the physical asset doesn’t, and are also without many of the same protections.Market growth tends to be slower than other cryptocurrencies.Although gold can protect from the downsides, it historically doesn’t carry similar returns to cryptocurrencies as BTC or ETH.However, there are also a few disadvantages: It’s a more straightforward route into the commodities market.Gold’s value is less prone to price fluctuations.You can own a token with the same value as gold, without needing to physically hold gold.There are several advantages to gold-pegged tokens: Most gold-backed tokens allow investors to redeem tokens for gold, similar to how dollar-pegged stablecoins generally can be traded for their $1.00 equivalent in fiat. For example, some tokens are backed at a ratio of 1:1, in which 1 token is equivalent in value to 1 gram of gold, whereas others will use different ratios.Īs the value of gold increases, so should the price of a token, making it a more stable investment than other cryptocurrencies. Gold-pegged tokens vary in how they’re backed.
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The amount of gold used to back a particular gold-pegged cryptocurrency must be held in gold reserves, which are commonly held at banks and other third-party institutions. Theoretically, the cumulative price of the tokens shouldn’t be less than the value of the physical assets Gold-pegged tokens aim to prevent price fluctuations by tying the derivative asset to a tangible asset. Gold-pegged cryptocurrencies are designed in a similar way to stablecoins, but rather than being backed by fiat are backed by the value of physical gold. Gold-Backed Tokens 101: How Do They Work? The following gold-backed cryptocurrency guide explores the most popular gold-pegged tokens, who is behind the project, and other pertinent information. Similar to stablecoins, most gold-backed cryptocurrencies represent a physical collection of gold custudied by the stablecoin issuer. Gold-backed, also referred to as “gold-pegged”, cryptocurrencies are backed by the physical value of gold. However, what if cryptocurrency could mimic the price of gold, while maintaining the advantages of its digital nature? What if people could leverage the benefits of holding gold without actually having to hold and protect heavy bricks of gold? (embed to video)ĭespite cryptocurrency’s growing popularity, many would-be cryptocurrency investors are swayed from buying or holding digital assets due to the industry’s volatile nature. Bitcoin” debate is almost as old as Bitcoin– with Peter Schiff often taking the anti-BTC pro-gold stance. Final Thoughts: The Future of Gold Pegged Tokensīitcoin, the flagship of cryptocurrency, is often referred to as “digital gold” to indicate its utility as a store of value, but rapid price swings in its short history are concerning to would-be investors keen on exploring digital assets, but with a preference for stability.Gold-Backed Tokens 101: How Do They Work?.