How gold-backed cryptocurrencies work ?

Investment in stablecoin corresponds to the indirect purchase of backed currencies. The part of purchasing cryptocurrency must be part of an investment and diversification objective.

Stability and security

Gold-backed stablecoins guarantee long-term security and stability. Indeed, the price of gold is regular, and plays a protective role against inflation. Unlike bitcoin BTC, stablecoins do not have high volatility. Furthermore, the price of gold does not depend on any market capitalization, which guarantees it complete autonomy. In fact, it is a way to limit the risk of loss in the event of an economic and financial crisis. Gold-backed stablecoins therefore have the same properties as physical gold, without having the main disadvantage: storage.

A way to diversify your investments

Financial investments require a minimum of knowledge and know-how. So, even if you have the possibility of creating an asset portfolio yourself, the crypto market contains subtleties. The advice of a wealth management professional can be useful to avoid certain pitfalls. Furthermore, an expert is able to tell you which crypto to choose, based on their needs and objectives.

Thus, your portfolio can include stablecoins to diversify your cryptocurrency wallet, already composed of bitcoin or raw materials.

The main risk arises from the loss or theft of your wallet. In this case, you lose your entire investment, because it is impossible to recover the code which allows you to make sales and purchases on the exchange platforms.

On the other hand, stablecoins that are not backed by gold face the same risks as the original assets. If the US dollar falls, the corresponding stablecoin follows. There is therefore a risk of capital loss. In the case of bitcoin, the risk lies in market confidence in BTC. If investors sell en masse, the price collapses, and vice versa.

The risk of trading cryptocurrencies also lies in understanding the blockchain. Indeed, most active cryptos are based on real-world uses. The company developing the product may make the same mistakes as every other company, causing the value of the crypto to fall.