It seems that the so-desired party since the last halving is going to start. I do not think it has much to do with the USA's elections, although they will undoubtedly influence the humor of the markets. But the metaphysics of the coming bullish cycle transcends the people at the office. Some extremely bullish guys say that they are going to get off this cycle when BTC reaches a value close to $ 250,000 (¿!) “Cosas vederes que non crederes, pardiez!” (Allow me an expression in the ancient Spanish of Quijote, maximum literary work of Spanish literature, which means something like “you will see things that you will not believe, by God!”)
The critical thinker investor, (not the trader of Wall Street or his/her masters), must use critical thinking and not get carried away by market pornography that is so manipulated by sharks without the slightest scruple and with the mood and Wall Street code, so far to what Satoshi Nakamoto imagined. That is why diversifying the portfolio and waiting is a logical and critical action. In my previous post, I referred to some cryptos related to the insurance industry, an industry that continues to grow.
Today I am going to refer as an alternative of portfolio diversification to a couple of coins backed by gold, which are something like stablecoins that instead of representing a dollar, represent a certain amount of gold, which was, it is, and will continue to be per secula seculorum the most important asset of the galaxy, even with all the problems it has regarding the difficult to storage, transport, and fractionation, problems that Bitcoin has solved with extraordinary success. But if, in case, a nuclear holocaust leaves the world without the Internet, Bitcoin will surely have problems, at least for a while. Instead, the one who has gold will become what a religion today calls God, or something like that. We will agree that a bag with gold scratches is millions of times more important than a promissory note issued by a central bank in the form of a paper known as a bill.
Disclaimer. I am not a Financial Advisor nor intend to Be. Therefore, nothing I say must be interpreted as an advice for investment. All i write is just for information and as a result of my researcher of the projects I mention, but in no way can it replace the research of each reader.
In some emerging countries, where large population groups do not have access to financial markets, the banking system, or to the Internet, the acquisition of gold jewels, constitutes a way of channeling savings, which is why the use of this metal is transformed into a form of investment or value reserve asset. As an industrial input, in regards to electronics, it is highly valued due to its high electrical conductivity and its corrosion resistance. Traditionally it is used in the manufacture of electrical and electronic components such as connectors, printed circuits, electronic plates, semiconductors, and microprocessors. Gold also has a traditional and widely known use in minting coins. Gold was used for a long time as money, since, given its characteristics, it fulfilled the three basic functions, that is, a medium of change, a unit of account, and a reserve of value. However, although over time it was replaced by paper, which is more practical and easy to transport, it still retains the value reserve function, in the production of ingots and currencies that are treasured in the central banks around the world. The most modern use of gold is that of ETFs.
The production of gold mines totaled 3,531 tons in 2019. Specialists believe that the gold peak has not yet been reached, that is, the point from which production begins to reduce. Golden mining production has stabilized, but it is not dramatically descending. According to the United States Geological Service, the underground stock of gold reserves is currently estimated at around 50,000 tons. Throughout the story, around 190,000 tons of gold have been extracted, that is, there is still 20% to extract. The advance of new technologies can make it possible to take advantage of some reserves already discovered but whose extraction is not profitable.
China is currently the country with the greatest gold production in the world, followed by Canada, Russia, and Peru. From the point of view of corporations, Nevada Gold Mines, the majority property of the Canadian company Barrick Gold, is the largest gold extraction complex in the world, with a production of around 3.5 million ounces per year. Large -scale mining is extremely intensive in capital, because it needs a lot of machinery and very expensive transport and access to deposits. About 60% of the world's operations are open-pit mines, and the rest are underground. There is also gold on the moon, which must be awakening Elon Musk's imagination. At the moment, the costs of extracting it and bringing it to Earth are extremely high. Something similar occurs in Antarctica, where due to extreme climatic conditions, extraction would not be profitable, and the same criteria applies to gold that is spread by the bottom of the sea.
But the best thing about gold is its recycling capacity (oil and most metals cannot be recycled), so we will never run out of gold, even when all reserves have been exhausted. It will pass from one hand to another, but it will not disappear from the planet. Cell phones have a good amount of gold, since it is an excellent conductor, and one of the great mobiles of criminals when stealing cell phones is the sale of gold contained inside. It is also true that you can think of a legal industry dedicated to the recovery of gold from discarded cell phones.
All this little preamble serves to explain how the two coins chosen for this post backed by gold work.
Stablecoins or stable cryptocurrencies are a type of digital asset whose value is linked to that of another asset through a parity ratio. The most popular stablecoins maintain a 1 to 1 ratio with the US dollar, while others do it with gold or even other cryptocurrencies. The first stable Crypto was Tether (USDT), created by the Tether Limited company. It went on the market in October 2014 and until 2018 was the only one of its kind, which allowed it to monopolize the entire segment. Then DAI appeared, of the Maker Dao project, and also USD Coin (USDC), which were showing the consolidation of the use of this type of assets.
As with the Real Estate industry dedicated to tokenize land or properties and sell those tokens, the gold has been tokenized making it an asset that can be acquired digitally and in small quantities, easily storable and traded, as is the case with any cryptoactive. PAXG and XAUT (and several others) constitute a modern way to invest in gold, combining the safety of a traditional asset with the flexibility of cryptocurrencies.
Tokenized gold digitizes the property of physical gold through blockchain, transforming it into easily negotiable tokens. This method allows the fractional property of gold, and provides immutable transparency, since nothing can be modified in the blockchain. Chainlink, the very well known oracle, verifies that gold reserves exist and coincide with digital records.
Pax Gold (PAXG)
Paxos, the issuer of PAXG, is a very large and recognized payment company, which claims to be building the future of finance, through the development of a very wide ecosystem based on blockchain technology. The Paxos platform was built on current financial regulatory structures to offer global solutions to its customers. Paxos also has regulatory oversight by The Monetary Authority of Singapore and is licensed as a major payments Institution. Paxos was the first Us-Based Blockchain Infrastructure Platform to secure a license. Here, its White Paper can be consulted, and also you can follow its blog to learn about the latest platform updates.
Pax Gold (PAXG) is the best cryptocurrency option backed by gold, since it offers direct exposure to physical gold with the flexibility of a digital asset. Each token PAXG is linked to a London Good Delivery troy gold ounce (31.10 grams) , safely guarded in vaults approved by the LBMA. The LBMA Good Delivery list is a set of standards for the production of gold and silver bars used in the wholesale market. LBMA is the London Bullion Market Association, the International Trade Association Representing the wholesale over-the-counter market for gold ans silver bullion. The LBMA Good Delivery List Specifies the rules that gold and silver bars must meet to be accepthed for delivery in settlements in the London Bullion Market.
PAXG is built on the Ethereum network, so it is easily accessible through any compatible wallet. PAXG is regulated by the Department of Financial Services of the State of New York and managed by Paxos Trust, which guarantees solid supervision. Without storage and instantaneous liquidation commissions, it is the only token that can be exchanged entirely for LBMA physical gold bullion.
As an entity that develops financial solutions for other companies, Paxos offers the Crypto Brokerage, a blockchain infrastructure for trading and payments, being its clients companies such as PayPal, Mercado Libre, and other similar. It is also dedicated to payments with stablecoins, reducing costs and accelerating operations.
PAXG is not the only active issued by Paxos. Paxos is also responsible for Lift Dollar (USDL), which distributes profits from its reserves daily to its holders, Pax Dollar (USDP) available in Ethereum and Solana, and the most recent PayPal USD (Pyusd), the new stablecoin of PayPal.
Theter Gold (Xaut)
Tether Limited is also a very large and solid company, known for its USDT token, which was the first stablecoin of the Crypto ecosystem. It was founded in 2014 by a group of early adopters of Bitcoin to make the technological revolution known. Tether Limited can be considered as the inventor of the stablecoins. Its tokens are the Most Widely adopted stablecoins and exist as digital tokens built on multiple blockchains. Tether supports US dollars with USDT, euros with Eurt, Mexican pesos with MXNT, Chinese Yuan with CNHT, and gold with XAUT.
Tether Gold (XAUT), issued by Tether Limited, provides access to physical gold through the flexibility of a digital token. Each XAUT is backed by gold stored in safe vaults around the world. Unlike Pax Gold, XAUT is available as a guarantee on platforms DeFi as Curve Finance and Uniswap, which allows investors to take advantage of yield farming or provide liquidity. See the White Paper.
XAUT offers solid liquidity, but less than PAXG. It admits operations 24/7 and allows the exchange of physical gold in Switzerland with a unique commission of 25 basic points. Backed by Tether, one of the most recognized names of cryptocurrencies, XAUT presents a solid alternative to PAXG for investors looking for a flexible asset backed by gold. From my point of view, XAUT is ideal to have an active backed by gold in the portfolio.
XAUT tokens are divisible into fractions as small as 0.000001 fine troy ounces of gold. All physical gold that backs XAUT tokens can be tracked on the company’s website. At any point in time, it is positive to verify the owner’s gold allocation in their vaults.
XAUT is an excellent asset for institutional investors. It provides them ownership of real physical gold with all the benefits of a crypto asset.
Conclusion
Since immemorial times, civilizations throughout the planet used gold as currency and reserve of value. Especially in times of financial disasters, which there were at all times, gold was used as a hedge. Unlike the debt papers issued by a central bank in the form of bills, gold maintains its intact value through the centuries, and this does not seem to be different as time goes by. face any danger that it stops being so. Any person of any social class on the planet sees gold as the best way to maintain wealth and pass it through to the next generations.
Now, one of the fundamental keys to the assembly of an investment portfolio is to find assets that are not very correlated with each other. In this case, gold historically had a negative correlation with the main financial assets, especially with the shares of companies. This suggests that any portfolio has to have gold in one of their formats, to minimize risk and volatility. Tokens backed by gold such as Pax Gold (PAXG), and Tether Gold (XAUT) are reconfiguring investment in gold by combining the security of physical gold with the flexibility of cryptocurrencies.
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