Insights On Investing In Gold-Backed Tokens

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Insights On Investing In Gold-Backed Tokens
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Gold-backed cryptocurrency tokens have long been hailed as the ultimate crossover between the traditional financial markets and the rapidly developing world of cryptocurrencies. 

As their name suggests, gold-backed tokens are cryptocurrencies where each unit is backed by a fixed amount of physical gold. Since these tokens are backed by real gold, their value is typically closely linked to its spot price and have largely appreciated in value in recent months. Since these are digital assets, they can be transferred, exchanged, or traded cheaply, without needing to physically transfer the gold they represent.

With the price of gold now close to its highest ever value and many economies now teetering on the verge of a recession, more people than ever before are looking to keep their money stored as one of the best hedges there is—gold. If that sounds like you, here’s how you can get your hands on gold-backed cryptocurrency tokens. 

On Third-party markets

Perhaps the easiest way to invest in gold-backed tokens is by purchasing them from third-parties using one of the myriad cryptocurrency exchange platforms. 

These exchange platforms range from being extremely simple token swapping protocols like Uniswap 2.0 and the upcoming JustSwap platform, which enable the decentralized trading of ERC20 and TRC20 tokens respectively. To more complicated decentralized exchange (DEX) platforms like IDEX and Kyber Network and centralized exchange solutions like Binance, Kucoin, and Poloniex. 

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Decentralized exchange platforms are arguably the most secure way to purchase gold-backed stablecoins from an exchange, but they often lack the liquidity that centralized platforms offer. Because of this, centralized exchanges still remain by far the most popular way to invest in gold-backed stablecoins and cryptocurrencies in general. 

(Image: CoinMarketCap)

The available markets for most gold-backed stablecoins can be found on CoinMarketCap and similar platforms.

Traders can usually simply check the website of the gold-backed stablecoin they intend to purchase to find out which exchange platforms it can be traded on. Alternatively, market tracking platforms like CoinGecko and CoinMarketCap also provide direct links to available markets. Some wallet providers also offer direct exchange functionality, usually through a partnership with Changelly, ShapeShift, and similar platforms.

Once an exchange platform has been chosen, the investor then needs to simply register an account and deposit the fiat currency or cryptocurrency (known as the quote asset) that will be traded for gold-backed stablecoins (also known as the base asset). The individual can then execute a market order to enter the market right away or place a limit order to buy if the market reaches a specified value. 

In some cases, investors may also be able to purchase gold-backed tokens from one of the various cryptocurrency brokers and OTC trading platforms. 

Direct From the Supplier

Although it is possible to buy gold-backed tokens from other holders via centralized and decentralized exchange platforms, the firms behind many gold-backed tokens also allow customers to purchase gold-backed tokens directly, or deposit their own gold into their vault to mint a batch of new tokens.

This has the benefit of being arguably the most secure way to purchase gold-backed tokens. After all, the token issuer is usually in direct control of the mintage process and can ensure you get your tokens, whereas exchange platforms rely on peer-to-peer trades—and might not always be able to guarantee liquidity.

(Image: Pixabay)

CACHE allows users to deposit their own gold in return for Cache Gold tokens (CGT).

Using Cache Gold as an example, investors are able to acquire Cache Gold (CGT) tokens from the platform by creating an account with CACHE and directly depositing gold to one of its vaults. CACHE maintains a comprehensive list of accepted bullion brands, including ABC Bullion, Credit Suisse, Perth Mint, and dozens more. Once deposited, CACHE will mint the corresponding number of Cache Gold tokens at a conversion rate of 1g = 1 CGT, and then distribute these to the customer. 

Likewise, Paxos Gold (PAXG) and Tether Gold (XAU₮) can both be purchased directly from the token issuers after creating an account, while customers can directly exchange a variety of cryptocurrencies for Digix Gold (DGX) on the token issuer website. 


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The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.