Gold-backed tokens outperform the crypto market. Further upward coming?


The crypto market has been showing a recovery trend lately. Even with the market crash, it has already been a year of massive returns for investors in the space. As expected with a high volatility space, crypto assets started to crumble in value. But despite the profitable year for cryptocurrencies, a subset of crypto tokens had made their mark as the highest-yielding assets, and they don’t seem to be stopping anytime soon.

Gold Backed Tokens Rising

These gold-backed assets have helped to increase gold’s liquidity by allowing the ownership of small fractions of gold. Physical gold is somewhat limited in its offerings and tokens like these have provided an opportunity for investors to get into the millennial asset. These tokens track the price of a commodity, in this case gold, in the same way that stable coins track the price of the fiat currency they are linked to.

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Unlike gold ETFs, gold-backed crypto tokens allow investors to own a portion of a physical gold bar, while investors with ETFs mainly bet on the price of gold. In addition, investors can exchange their gold-backed tokens for physical gold whenever they want.

These characteristics have attracted more and more investors to these commodity-backed crypto tokens and as a result, the price of these digital assets has skyrocketed. So much so that these assets have outperformed the crypto market in general.

Gold Backed Tokens Outperform Crypto Market | Source: mysterious investigation

Two of these gold-backed commodities posted the highest growth rates; Tether Gold (XAUT) and PAX Gold (PAXG). These two crypto assets have grown to market caps of $409 million and $358 million respectively, representing a significant year of growth 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. By 2021, the total crypto market had grown by 150% in total. By contrast, the gold-backed token market surged to 360% over the same period, yielding more than double that of the broader crypto market, with PAX Gold and Tether Gold leading the way.

Total Market Cap of Crypto at $1.95 Trillion | Source: Crypto Total Market Capitalization on TradingView.com

Other commodity-backed crypto tokens are also starting to gain prominence in the market. Others have emerged tied to silver, palladium and even oil, but all of these have faced obstacles that they have found difficult to scale, stunting their growth.

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Nevertheless, the gold-backed tokens have shown that commodity-backed tokens have a future in the market. With growth expected to continue in the crypto market, these tokens may be on track to become one of the most profitable subsets of crypto investments in the space.

Featured image from Finance Magnates, charts from Arcane Research and TradingView.com

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