Cryptocurrencies

The Crypto Market Needs to Lean Back on Gold to Fight Extreme Volatility

Efforts of enormous proportions are being spent on futuristic products and protocols to mitigate the extreme volatility of the crypto market. While every stakeholder in the market is looking into the future with squinted eyes, we fail to realize the weapon we have had with us for decades.

Before that, why was bitcoin criticized? Simply put, it was a digital currency with no physical backing of value. Like fiat currencies, bitcoin was not pegged to any stable asset. Despite their inherent benefits, cryptocurrencies are an authoritarian and governmental nightmare. 

Now, with blockchain tech being applied by several industries, adopting crypto is imperative for purposes not limited to mere trading. This enables the realization of gold-backed cryptocurrencies i.e. digital stable coins pegged to the value of physical gold. Unknown to many, the world’s reserve currency, USD, was backed by gold for a substantial period.

Gold - An Unparalleled Champion of Stable Growth

In the past two years, the crypto market has scaled new heights concerning both volume and value. The torchbearers of the market, Bitcoin (BTC) and Ethereum (ETH) rose to unimaginable highs. However, we witnessed frequent bleeding of the crypto market with pullbacks amounting to around 50%.

The excitement around the crypto market has made people rich while killing the livelihoods of many others. Undeterred from all the excitement and nightmares, gold has grown by around 25% in the same period. Amidst larger-than-life speculations and more drastic aftermaths, gold has performed silently. Historically too, gold has beaten inflation by a fair margin. And exactly why gold is considered to be an ideal investment for the multitude.

And there are negligible factors that can disrupt the value of gold, unlike tweets for crypto and inflation for fiat currencies. This inherent consistency in its fundamentals is why the metal is so valuable. Add this facet to their massive amount of liquidity, gold is an ideal commodity for cryptocurrencies to be pegged to.

Is Gold the Answer to Extreme Volatility of the Crypto Market?

Proverbially, in the crypto market, there has been a gold rush for the past two years. But, the concerning factor is the lack of sustainability in the market. With resources of knowledge scarcely available, the crypto market spells doom to naive participants. However, gold-backed cryptocurrencies can leverage the relevancy bias of gold to ensure the participants entering the market are knowledgeable about their investments.

Another concern of crypto is its regulatory uncertainties, but with gold being a universal asset, there exists an opportunity to ease the acceptance of cryptocurrencies. With fiat currencies fighting inflation, gold-backed crypto can be the new medium of exchange for institutions.

Backed by gold, these assets enjoy liquidity and universal acceptance. And they can further reap the benefits of security and transparency, thanks to blockchain technology. So, businesses facilitating the gold-backed crypto can peg their tokens to a piece of gold (Eg: 1 gram) and shall be accountable as the trusted custodian for those currencies.

Since the fluctuation in gold’s price is minimal, gold-backed cryptos are a great avenue for investment. We, at Asia Broadband Inc., have developed the AABB gold token, which is backed by the gold derived from our mining operations. Gold is a tested commodity to hold its value even during recessions and economic failures. Couple this with crypto, the world receives an asset that is the marriage of stability and accessibility.

The Crypto Market can Embrace Gold’s Bull Run

Currently, several factors are fueling the growth of gold’s value. First off, the inflation anxiety has worried a lot of investors to loosen their wallets in the traditional stock market. Also, a weak dollar is a direct indicator of the growing value of gold.

And one concern of investing in gold in its physical form is the absence of sustainable storage practices, and/or the cost of its maintenance. This concern is being solved with the crypto integration, as the participant holds the token, rather than physical gold. 

Now, for investors looking to dive into the crypto market, its volatility is a massive headache. To date, the headlines of crypto crashes can demoralize investors from parking their funds in cryptocurrencies. Without the proper knowledge, crypto is a great place to ensure bankruptcy. So, investing in gold-backed crypto is a great starting point for investors, even new ones, to grow their money.

Coexistence of Gold and Crypto is the Way Forward

With gold, crypto investors find a fundamentally strong asset and mitigate extreme volatility. In crypto tokens, participants wishing to invest in gold need not worry about its storage. And leveraging the gold’s bull run, investors amass wealth while the crypto market matures.

There have been arguments citing how bitcoin has the potential to replace gold as the inflation-hedge. But, the crypto market, in itself, is stuck in a speculative mania where stability is a far-fetched dream. So, the advent of gold reflects that collaboration is where the future lies.

However, the coexistence of the inflation-sensitive duo of cryptocurrencies and gold is paving the way to a brighter future. And their coexistence shall brew the future of the crypto market built on the premises of reliability and convenience. 

About the authorAsia Broadband, Inc CEO Chris Torres, is a finance and business administration professional and brings with him more than a decade of corporate, operations, manufacturing management experience, most recently from several long-term leadership positions with Flex Mexico. Along with his Bachelor of Arts Degree in Economics and a Master’s Degree in Finance from TEC de Monterrey, Mr. Torres possesses a flair for technology and has extensive cryptocurrency investment knowledge. Asia Broadband, Inc. (OTC: AABB) is a resource company focused on the production, supply and sale of precious and base metals to primarily Asian markets. Asia Broadband has created a hybrid cryptocurrency, AABB Gold Token (AABBG) backed by 100% physical gold.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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