Blockchain.com has published a report in which it analyzes crypto-assets backed by gold, comparing them to other ways of owning physical gold and bitcoin.
In the long report, bitcoin and gold are considered as hard assets for investors fearful of the financial markets crisis.
For example, as far as gold is concerned, it is pointed out that in the last 12 months its price has increased by about 35% and many analysts predict that it could set new historical highs.
This is inevitably also increasing interest in gold-backed crypto assets, because they can be traded on exchanges and stored in crypto wallets, to the extent that their total value has grown more than 16 times over the last year, from $10 million to $160 million, mainly due to the launch of 3 new tokens.
In addition, 94% of the total market value is held by only 3 tokens:
- Tether Gold (XAUT) with a market cap of $87 million,
- PAX Gold (PAXG) with $44 million,
- DGLD with $25 million.
The advantages of gold-backed crypto assets
These tokens offer many advantages over traditional gold, such as:
- availability of exchanges 24/7,
- better transferability,
- ease of use (via the Internet),
- low conservation cost.
In addition, like bitcoin, they can be owned and stored entirely outside of banks and the traditional financial system, and without intermediaries.
Their main disadvantage, however, lies in cybersecurity, from which physical gold does not suffer at all.
However, there are significant differences between them, such as the percentage of gold collateralization, the cost of storage, the blockchain on which they are based, the physical storage of the bars and the options to convert the tokens into physical gold.
Other differences include regulatory status, trading or redemption requirements, although according to the Blockchain.com report, the most important difference lies in the different commission structures of token issuers, particularly in relation to how the token is intended to be used.
The report also argues that gold and bitcoin are not competing assets, but are complementary, not least because there is a fundamental difference that cannot be bridged, namely the fact that bitcoin is only and entirely digital, while gold is one of just over a hundred fundamental chemical elements that form the primary constituents of matter.
Finally, the report explicitly stresses that investors who own digital assets such as bitcoin should also consider gold carefully.
The document is full of charts and graphs that give a better view of the comparisons and is in-depth enough that it requires time and attention to examine it.
However, it does not contain any indications or advice regarding investments, but only a sufficiently in-depth analysis of the technical characteristics of these assets, allowing investors to have an overall picture.
