The Rise Of Gold-Backed Stablecoins In A Post-Pandemic World

COVID-19 wreaked havoc on the global world of finance. Markets suffered as economies shut down and dealt with the fallout of high unemployment. Many nations pursued stimulus packages and other economic measures that further decreased confidence in the long-term viability and sustainability of fiat currencies.

In times of trouble, investors often run towards stable and well-known assets, like gold. Physical gold bullion sales, and interest in gold-backed cryptocurrencies bought on platforms like Gold Exchange, jumped during the first half of 2020 as investors looked towards alternative assets.

By August 2020, the U.S. Mint had sold four times as many ounces of American Eagle gold coins than in all of 2019. The World Gold Council said by July, gold-tracking ETFs had already pulled in a record-breaking $50 billion.

Later in the fall, analysts from Bank of American and VTBCapital speculated the spot price of gold bullion would hit $3,000 per ounce in 2020. They cited continued negative interest rates as a response to COVID, inflationary pressure, and the weakness of the U.S. dollar amid the pandemic.

Gold prices started to slip once news about COVID vaccines hit the headlines. Speculation is optimism about the medicine pushed interest towards pharmaceutical and medical stocks.

However, others argue that vaccinations take time, and infection rates, and a state of fear about the virus could remain constant in 2021 and even into 2022 if there is significant pushback about receiving a vaccine.

Despite the continued uncertainty, cryptocurrencies backed by gold have become a big winner amid COVID, and as the world begins to slowly adjust and see new realities while looking forward to the end of the acute phases of the pandemic.

The Allure And Popularity Of Cryptocurrencies Backed By Gold

Digital coins backed by gold only look set to rise in popularity in notoriety, especially in a post-pandemic world.

Cryptocurrencies underpinned by gold have the unique advantage of giving investors a chance to buy digital assets and invest in physical bullion which they can receive after redemption. This unique attribute makes digital coins backed by gold a versatile investment that will have intrinsic value, no matter the current state of the precious metal and cryptocurrency markets.

Many speculate if the coronavirus and other variants are contained, then investors will opt for riskier assets to make more money and recoup losses. Cryptocurrency looks set to remain one of the most alluring opportunities for people eager to make money.

On the other hand, traders will turn towards precious metals like gold if a post-pandemic world is rockier than expected. Cryptocurrencies backed by gold stand to benefit from both options, positioning the asset class well for any sort of post-pandemic future.

The decision-making process by the Federal Reserve in how to handle COVID, and a world beyond the pandemic, also bodes well for gold-backed cryptocurrencies.

If the Federal Reserve takes a more hawkish stance with their monetary policy, gold prices could dip if dollar index trends start looking up. The opposite effect could occur if the financial authorities make decisions that lead to a decline in the dollar index, driving the values of precious metals like gold up as investors strive to compensate for a turbulent market.

Since cryptocurrencies and bullion are independent of central authorities like the Federal Reserve, their markets could rapidly move and change in response to decisions, presenting opportunities for investors to quickly trade and make profits with cryptocurrencies backed by gold.

These digital coins can be bought, sold, and traded in seconds with low transaction fees and high liquidity, making the asset a strong choice for various investors who are interested in portfolio diversity.

The Future Of Economics In A Post-Pandemic World

Uncertainty remains high as the coronavirus continues to take a toll on global governments and central banks across the world.

Cryptocurrencies backed by gold only increase in popularity as investors search for assets with strong growth potential, coupled with built-in price floors to prevent massive price swings of losses. Gold-backed coins only look to become a stronger investment opportunity as more exchanges and coins foster the buying, trading, and selling of stablecoins backed by precious metals.

Photo credit, Michael Mandiberg, via Flickr.

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