Many have wondered how the domains of gold and crypto might intersect with each other. Is there any common ground? Does it have to be one over the other? Not necessarily if you take a closer look.
There appears to be regular competition between gold maximalists and their blockchain counterparts. The one side has its impenetrable record of history to its name. The other has technological innovation, progress, and huge gains to offer.
But with great gains comes great responsibility. If you lack the latter, you are in for a grim surprise, even permanent loss.
The industry’s experts always considered gold a safe haven asset that withstood the test of time and rightly so. It is the usual pick for conservative investors who are patient and resilient towards the emotionality of the financial markets.
While glancing at the bitcoin-initiated blockchain industry, it shows a sheer endless potential for novel application and invention. The booming NFT market alone is a potential ‘gold mine’ (pun intended). But with gold, there simply can’t be quite as steep and hefty changes, extensions, and surprises, for better and for worse.
Why not do both?
Exactly. Why, indeed? You can trade both gold and crypto on Foreign Exchange.
Reliable platforms like the international Forex broker OctaFX allow you to participate in several markets, staying in touch with national fiat currencies and the famous yellow metal or the most established cryptocurrencies on the market.
The currency pair XAUUSD (gold and U.S. dollar) is a popular option for traders who want to apply their know-how of market dynamics and specifically have gold involved in the profit equation.
As already mentioned, gold as a store of value is quite resilient, but it can be like a sponge concerning the market’s trust in fiat currencies. If it goes down, capital flows into gold, weakening fiat in turn. When fiat regains market trust, gold is usually squeezed again.
Nonetheless, sweeping gold off its feet by a government’s regulatory onslaught was never a lasting move. Gold consistently outlived all governments for millennia—the latter always displaying a fundamental dependency. So there’s that.
The synergy of both worlds: Gold existing on the blockchain
Some might be unaware that companies use the blockchain to make gold accessible to crypto investors while simultaneously providing an entry point for traditional investors to access the blockchain.
One such company is Paxos Gold which issues special stablecoins on the Ethereum network called PAXG. One PAXG equals one fine ounce of gold, which the token holder can physically redeem in many places worldwide. You can even earn interest on your ‘blockchain gold’, so to speak. Many platforms offer this as an incentive to keep your gold stablecoins as liquidity on their networks. It is one of the alternatives to people choosing cold storage options, like a privacy-oriented wallet.
An anecdote from the golden cryptosphere
Peter Schiff would have to be the most prominent ‘fudder’ (definition of spreading ‘FUD’, or ‘fear, uncertainty, and doubt’: one who is excessively bearish on a particular financial instrument) of bitcoin and the cryptosphere as a whole. The American stockbroker and gold enthusiast has yet to believe or trust in bitcoin as a credible asset. His attitude is steadfast, decisive and somewhat admirable since even the fact that his eldest son became a bitcoin investor hasn’t shaken the experienced financial expert of his position. Schiff still upholds the ultimate unreliability of bitcoin as a store of value and regularly calls people to abstain from investing.
Schiff even owned a bitcoin wallet with actual bitcoin on it at one point but claimed that the app storing his cryptocurrency got corrupted and led to permanent loss. Other sources that assisted Schiff in setting up his bitcoin wallet affirmed the opposite—he simply lost his keys.
Don’t get caught up in this unnecessary, even illusionary stand-off between these two asset classes and their communities. Both have their glaring strengths and should be part of a wisely diversified portfolio. If you settle on one monolithic asset, you restrict your mobility to act as an investor. Gold proved its use case and keeps storing value long-term as an inflation hedge. It’s just the way it is. On the other hand, cryptocurrencies allow multiplying initial investments, draw significant profits, and move the new capital to more static and resilient assets, like, for instance—there it is again—gold or its stablecoin equivalents. Another approach is buying back those cryptocurrencies once they hit a substantial low again.
In any case, stay educated and widen your horizon on these markets. Remain flexible and open-minded. As always, calculate your cost-benefit ratio to be as balanced as it gets without missing opportunities.
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