Gold-backed cryptocurrencies have become a popular way to invest in the gold market. The combination of cryptomania and record gold prices has put this asset class in the spotlight.
This method of buying gold offers many advantages over buying physical gold bars or coins, such as not buying whole bars or having to worry about storage.
If you’re already invested in the crypto market though, it might make more sense to buy gold with Bitcoin instead.
Gold-backed and asset-backed cryptocurrencies
A gold-backed cryptocurrency is a cryptocurrency where each token is backed with a defined amount of gold (for example 1 token = 1 gram of gold). These asset-backed tokens are also known as stable coins. For more a more detailed guide read the complete guide to gold-backed cryptocurrency.
While gold is the most obvious choice as a non-fiat asset-backed token, there is still no leading gold-backed token. The dollar-backed Tether is currently the world’s third largest token by market cap, yet there is no gold-backed token in the top 100.
Buying gold with Bitcoin
If you are shopping around for a gold-backed token and are confused by all the choices, you might be better off simply buying gold with Bitcoin. For this there is one clear leader – Vaultoro.
Vaultoro offers instant access to the gold market, and it’s an easy way to park Bitcoin earnings somewhere other than fiat. The gold is 100% owned in the name of the account holder, and held securely in Swiss gold vaults. This is known as vaulted gold, where the gold that is held in your name cannot be taken by Vaultoro or used as collateral for other ventures. Here is our full guide to Vaultoro.
As a leading news site for gold and gold-backed cryptocurrency, we get emails and comments asking what is the best gold-backed cryptocurrency to invest in. So far though there isn’t a leading token which can claim to be the best gold-backed cryptocurrency.
I tip my hat to the early adopters who are backing the many gold-backed tokens that are live or in development. Eventually there will be a clear and obvious choice, and maybe they will become household names that become synonymous with buying gold online.
Until then, here are some of the reasons why I prefer buying gold with Bitcoin over a gold-backed cryptocurrency.
Vaultoro is an established exchange
Vaultoro is the world’s first gold/Bitcoin exchange, having launched in February 2015. In crypto years this is ancient. It has since grown to become the leading place to buy and sell gold with Bitcoin.
Bitcoin was launched in January 2009, and by 2014 the first gold-backed cryptocurrencies were being developed. Those pioneering coins no longer exist, so Vaultoro now precedes any active gold-backed token.
To get a idea of the tokens that have come and gone over the years, refer to the gold-backed crypto graveyard.
Instant liquidity
While a gold-backed cryptocurrency may tick all the boxes for features and safety, an important factor to consider is if you can sell it immediately. Are there enough buyers on the in-house market place, or is it listed on other popular exchanges? A token that is backed with 1 ounce of gold will always be worth the current rate of 1 ounce of gold, but if there is no one on your market place to buy it then what worth is it to you.
Too many gold-backed cryptocurrencies to choose from
At the moment the gold-backed cryptocurrency market is still in the early stages of establishing familiar brand names in the crypto sphere. There is no Google or Amazon of gold-backed cryptocurrencies (yet). Or a better analogy would be there is no Tether of gold-backed cryptocurrencies yet. Even Tether Gold has not been able to use its brand recognition to be able to become the leading gold-backed token.
If you did a poll among regular crypto investors, you would most likely find that everyone has heard of Tether. If you asked what was the leading gold token, there would be very few that know the answer.
In 2020 there are over 80 tokens that are available on the market or in development. At this point there is still no dominant gold token that has become the go-to gold cryptocurrency.
A comparable scenario is the early years of the automotive industry in the United States. In the first decade of the twentieth century there were hundreds of motor vehicle manufacturers. By the 1950’s the market was reduced to the “Big Three” of General Motors, Ford, and Chrysler.
You can always invest in a gold-backed token later
Personally I would rather see the market evolve to include a small group of leading tokens rather than one dominating token. I think in the next few years more gold tokens will fall by the wayside, as the aforementioned crypto graveyard will attest. By then it will become more apparent which ones are the market leaders. If you do find the gold-backed token of your investing dreams then you can always buy them with the Bitcoin in your Vaultoro account.
It might even be Vaultoro’s own VGold project that becomes one of the lead gold tokens. This is a 100% backed by gold token, and it will be tradable on other exchanges.
Disclaimer: Goldscape is an affiliate of Vaultoro and holds gold and Bitcoin in Vaultoro accounts. This article is editorial and not financial advice. Research your own options before investing.
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