Turbulent economic conditions in 2020 have caused many investors to look for different assets.

Fiat currencies are in flux due to lockdowns that have ravaged economies. While the stock market has seen unprecedented gains, some remain skeptical about long-term growth prospects amid the economic fallout from COVID-19. 

As a result, some have started to flock to alternative investments. Cryptocurrencies like Bitcoin have jumped in value (55% from January-July 2020), while even the value of precious metals like gold has risen (26% from January-July 2020). 

Some are looking to combine both investments and are putting money in gold Backed cryptocurrency. 

What Is The Allure Of Gold-Backed Crypto? 

Cryptocurrencies backed by gold have drawn attention from buyers eager to protect their assets against economic volatility. 'Digitized' gold is also substantially easier to store and manage than physical bullion.

Companies that issue gold-backed stablecoins offer buyers the chance to purchase coins backed by physical gold reserves. Buyers maintain the ability to cash out their investment for actual bullion.

A few of the main reasons why buying cryptos backed by gold has become popular include,

1) Serves As A Stable Protection In Uncertain Times

Traditional cryptocurrencies like Bitcoin, Ethereum, and Litecoin are at the mercy of market forces. Investors can wake up one morning to discover their investments have skyrocketed in value. Or they could start the day with the realization they have lost a lot of money if the cryptocurrency's price dipped.

With cryptocurrencies backed by gold, the coin's value will not dip below the spot price of gold (traditionally an asset that has always remained valuable). If the coin proves to be popular and undergoes high trading volume, there is a chance the cryptocurrency's value could even rise above the spot price of gold.

The architecture of cryptocurrencies backed by gold gives investors a spot price 'floor'. This makes investing a prudent move for those interested in hedging against inflation or volatility while still taking advantage of virtual currencies immense potential.

2) Provides Buyers With Security About Investments

Stacking gold bullion at home might seem fun, but poses significant security risks. Robbers could clean out a gold collection and steal countless amounts of money. Investing in a proper safe to store bullion can cost a large sum.

Buyers who send off bullion to be stored in a bank will have to trust the institution's security and auditing procedures to ensure their investments are safe and remain tamper-free. For those who store bullion in offshore depositories, visiting the financial entity in person might not be possible at all.

People are turning to cryptocurrencies backed by gold because they streamline and simplify the security process. All reputable companies offer audits of stored gold reserves. Many will even set up cameras and live streams for holders to view physical bullion any time and provide verifiable records that the gold on-hand is not faked or fraudulent. 

It is vastly easier to store cryptocurrencies backed by gold on a hot or cold wallet than managing physical bullion. When it comes time to cash out investments for gold, any reputable cryptocurrency backed by gold will have legitimate and safe protocols. Cryptos backed by gold offer a number of security advantages over holding physical bullion. 

3) Opportunity To Buy Fractionalized Bars

One of the most significant drawbacks of purchasing physical gold is its availability in specific denominations. If the spot price of an ounce of gold is hefty, then even purchasing a gram of gold could be financially inaccessible for many. 

Some cryptocurrencies backed by gold give buyers a chance to purchase fractionalized shares in any amount. Investors then can purchase gold no matter the size of their bank accounts. 

This democratizes gold access and permits more people to introduce gold bullion into their investment portfolio, without paying premium prices for smaller amounts of physical gold.

Overall, the ability to purchase fractionalized shares of cryptos backed by gold is one of the most significant advantages of gold-backed stablecoins. 

Cryptocurrencies Backed By Gold Prove To Be Popular 

The stablecoin market is only heating up amid sustained economic volatility due to the coronavirus. The advantages cryptos backed by gold have over physical bullion continue to make the digital coins popular investment options.