When conventional cryptocurrencies such as bitcoin, ethereum and ripple are going through a series of ups and downs, there is one category of tokens which have performed relatively better, at least in terms of volatility. These are gold stablecoins. It is worth pointing out that stablecoins are usually pegged to the US dollar in order to curb volatility.
On the other hand, gold stablecoins, can be seen as similar to digital gold but the difference lies in the fact that their sale & purchase takes place via blockchain technology.
The largest, Pax Gold or PAXG, has jumped 7.4 per cent in 2022, while its main rival Tether Gold surged 8.5 per cent.
In past three months alone i.e., starting January 20, Tether Gold has gone up by 6.3 percent, whereas PAX Gold rose by 6 percent during this period.
Some experts opine that their price is rising as a result of rush for gold. Since they track the physical gold prices, the increase in gold prices cause these gold stablecoins to rise.
One of the key concerns of crypto investors is that it is not backed by any real asset.
Lately stable coins are being used to move funds around. It is quite convenient to swap major stablecoins for cyptocurrencies instead of swapping fiat currencies such as INR or USD.
Gaurav Mehta, founder of Catax, a crypto tax and audit platform, elucidates the distinction between stablecoins and conventional cryptos when he says, “Stablecoins are representation of values based on the blockchain. Their supply is not limited just as conventional cryptocurrencies. They have less volatility because they are backed by acceptable currencies and assets such as US dollar & gold.”
On being asked if they are better investment opportunity in comparison to other cryptocurrencies, he says: “It’s not fair to compare the two.”
Here are more details around the key gold stablecoins & their offerings to investors:
What is Tether Gold?
Tether Gold is offered by TG Commodities Limited. One full token represents one fine troy ounce of gold on a London Good Delivery bar.
The idea behind Tether gold is to have a cryptocurrency backed by gold – a ‘safe haven’ that gains value over time. It provides the security of a digital asset and the safety of being pegged to physical gold.
The token can be transferred to any on-chain address from the purchasers' Tether wallet where it is issued after buying it. Specific gold bar are associated with each address where Tether Gold is held.
What is PAX Gold?
PAX Gold is a digital asset of which one token equals one ounce of gold and it relates to a bar in Brinks’ vaults in London all the way down to the serial number. Owning PAXG means you own the underlying physical gold held in Paxos Trust Company’s custody. It is the only digital token you can redeem for LBMA-accredited gold bullion bars.
One can also get smaller amounts through physical gold retailers around the world.