Gold-Backed Tokens Surge
These gold-backed assets have helped to increase the liquidity of gold by enabling the ownership of small fractions of gold. Physical gold is somewhat limited in its supply and tokens like this have provided an avenue for investors to get in on the millennium-old asset. These tokens follow the price of a commodity, gold in this case, in the same way, that stable coins follow the price of the fiat currency they are pegged to.Related Reading | Crypto Market To Drop 80% Like Early Internet Company Stocks?, Why This Analyst Thinks So
Gold-backed tokens outperform crypto market | Source:Two of these gold-backed commodities have recorded the highest growth; Tether Gold (XAUT) and PAX Gold (PAXG). These two crypto assets have grown to a market cap of $409 million and $358 million respectively, marking a significant growth year for each asset.
Beating The Crypto Market
Even with the crypto market marking several bull runs in 2021, gold-backed tokens have managed to outperform the market. In 2021, the overall crypto market had grown a total of 150%. In contrast, the gold-backed token market surged as high as 360% in the same time period, returning more than twice that of the broader crypto market, with PAX Gold and Tether Gold leading the charge.Crypto total market cap at $1.95 trillion | Source:Other commodities-backed crypto tokens have also begun to gain prominence in the market. Others have emerged that have been tied to silver, palladium, and even oil, but all of these have been met with obstacles that they have found hard to scale, stunting their growth.
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Nevertheless, the gold-backed tokens have shown that commodities-backed tokens do have a future in the market. With growth expected to continue across the crypto market, these tokens may be on their way to being one of the most profitable subsets of crypto investments in the space.Featured image from Finance Magnates, charts from Arcane Research and TradingView.com