Unsurprisingly, the crypto market is extremely volatile. Every effort is being put into futuristic products and protocols to mitigate this extreme volatility. Let’s talk about the most famous cryptocurrency and also the current favorite of many: Bitcoin. This digital currency, which comes with no physical value protection, attracts all the criticism. In contrast to how fiat currencies are tied to a stable asset, cryptocurrencies are not. Blockchain technology deserves all the credit for being the major contributor to the popularity of cryptocurrencies. These are the days when blockchain technology was limited to mere trading; Today this technology has made many industries rely on it for various purposes.
Needless to say, talking about how promising the cryptocurrency market has been to investors, both in terms of volume and value. Yes, people have made huge profits from the growing demand for cryptocurrencies, but the fact that there have also been bad days when the market has bled profusely cannot be overlooked either.
When it comes to gold, let’s first take a look at the world’s reserve currency USD. It is not known to many, but the USD has been backed by gold for quite some time. While the demand and popularity of cryptocurrencies has overshadowed gold’s performance, it’s worth noting that gold had its unique way of differentiating itself from the rest. He was a silent actor all along. In contrast to the effects of cryptocurrencies and inflation-related tweets for fiat currencies, gold is relatively on the safe side as there are negligible factors that can alter the value of gold to fairly beat inflation and high liquidity are among other reasons why gold is is considered to be the ideal product for linking cryptocurrencies.
Let’s talk about it now: can gold be an answer to combat the extreme volatility of the cryptocurrency market? Regulatory uncertainties have always been a concern for cryptocurrencies, but with gold being a universal asset, an opportunity to facilitate the adoption of cryptocurrencies. With fiat currencies having to fight inflation from time to time, there is no question how well gold-backed cryptocurrencies can be the new medium of exchange for institutions. Addressing the issue of scarce knowledge pertaining to the cryptocurrency market, the gold-backed cryptocurrency is a step to ensure that market participants are informed about their investments.
Cryptocurrencies not only enjoy liquidity, but thanks to blockchain technology, the benefits of security and transparency can also be reaped. The minimal fluctuations in the price of gold are another reason why such an investment would be worthwhile. Maintaining value even during recessions and economic failures in combination with cryptocurrencies would lead to a combination of stability and accessibility. In general, the coexistence of gold and cryptocurrencies could be a great way to mitigate extreme volatility.
