Owning gold is a great defensive asset, but there are so many pitfalls to transacting and storing it. I thought crypto tokenized gold may solve some of these issues, but is this extra effort worth it for what you get?
After doing a lot of research and looking into various gold alternatives. I tried a few and just held them for a bit and looked into their past performance and how closely it tracked with actual gold. Many of them were good enough and satisfied my original screening but after some time of doing this research, I came to find that Bitcoin still offered so many more benefits. For example, with the many gold stablecoins that exist, how do I know which ones are reliably backed 1:1 with real gold and how can I be sure that their storage methods are as good as the rest. I compared them using this chart: https://goldprice.org/gold-price-chart.html
The currencies I looked into were: Tether Gold (XAUT), Paxos Gold (PAXG), Perth Mint Gold Token (PMGT), Digix Global (DGX), and Meld Gold by Algorand.
These were listed as the top 5 according to Coinmarketcap: https://coinmarketcap.com/alexandria/glossary/gold-backed-cryptocurrency
I couldn’t find much info on Meld Gold and PMGT & DGX didn’t seem to track nearly as accurately as PAXG & XAUT, so I decided to just look into those two. PAXG & XAUT seem like good enough options, but still how can I rely on their security and everything making this possible. There have also been several instances where exchanges and services that previously offered gold-pegged cryptocurrencies that have disappeared like Anthem Gold for example. Vaultoro is another option, but that’s simply just being able to buy gold with crypto, not necessarily what we are looking for here.
PAXG is good because you can trade it in a decentralized way, but if you want to do that on Uniswap, you’re still going to pay high fees with the cost of Ethereum gas fees currently and thus you don’t avoid high transaction fees. I did awhile ago though, so I was able to avoid this conundrum.
XAUT you can find on only a couple of platforms, but I was able to buy a bit on FTX. With XAUT though, you’re unlikely to be able to trade this in a decentralized way.
I used to be interested in testing this out to get around the faults of owning gold physically until I realized that the same amount invested in most cryptocurrencies would give me way better returns and that the specific gold crypto asset itself wasn’t the issue. Plus, gold has not had the best returns the last couple of years so how safe is it really? We still haven’t gotten back to all time highs seen near the beginning of the pandemic that weren’t previously seen for 5 to 10 years.
This also brings me back to the original issue of owning a derivative asset. I don’t advise holding Bitcoin that isn’t real bitcoin like on Paypal or Wrapped Bitcoin (WBTC) on the Ethereum blockchain. In this same manner, I don’t recommend owning a derivative of gold if you can just hold the gold yourself. By allowing someone else to have the actual ownership, it’s not that decentralized given they could be robbed or cheat amongst many possibilities.
So, it took all of this to say that when I compare the benefits and drawbacks of gold and Bitcoin, even with the solutions presented by crypto tokenized gold, you still have many of the drawbacks that could be solved by simply owning Bitcoin. For example, gold has issues with transacting and holding, you can solve this by holding bitcoin where you can trade decentralized, nearly instantly, and pay significantly less fees. If you have the crypto tokenized gold, then you still don’t have nearly the same level of decentralization and you’re not holding the direct underlying asset. And as I mentioned, because gold isn’t even performing very well in recent years, there is little benefit to taking on that extra risk that you could avoid with Bitcoin. The major difference with Bitcoin is that it’s much more volatile, but overall, generally trending up with an average gain of over 200% per year since inception.
The idea of tokenized crypto stable gold coins is a cool concept, but in practice, it opens up just as many boxes as it closes and then you’re still left wondering how the storage etc. is paid for. Avoid these concerns and just go with something simpler and more decentralized like Bitcoin.
Have you ever bought crypto gold or thought about buying some? Is it safe or too risky? What are your thoughts on buying crypto gold versus just buying bitcoin? Let me know what you think about this in the comments below and don’t forget to subscribe!
*Disclaimer: This is not financial advice and is purely for entertainment purposes. What you see, hear, or read is my personal opinion, and any statements made are based on my views and should not be misconstrued as fact. My crypto portfolio may or may not be simulated*
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