How crypto will merge with gold and silver
HalfDime
Posts: 377 ✭✭✭✭
This week in Congress they are voting on legislation and calling it Crypto Week. One of the provisions they may add in is to merge crypto with commodities. If it doesn't happen this week, it will likely pass eventually. This crypto will tie a stablecoin to a commodity like gold or silver. For people who only hold smaller amounts of gold or silver, this may not make sense. But for someone who wants liquidity to buy and sell larger amounts, or doesn't want to hold the physical, it may.
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Commodity-backed stablecoins are digital assets whose value is pegged to the price of a physical commodity, such as gold, silver, oil, or other tangible assets. The issuer of the stablecoin holds reserves of the underlying commodity and typically allows holders to redeem their tokens for the physical asset, subject to certain rules and minimums.
Key characteristics:
Pegged to a commodity: The value of each token is directly linked to a specific amount of a commodity (e.g., one token equals one troy ounce of gold).
Redeemability: Holders can, in most cases, redeem their stablecoins for the underlying commodity, though there may be minimum redemption amounts and logistical requirements (such as identity verification and location restrictions).
Transparency: Reputable issuers provide regular independent audits to verify that the reserves match the circulating supply of tokens.
Portfolio diversification: These stablecoins offer digital access to traditional assets, providing a hedge against inflation or currency devaluation and allowing for diversification within a crypto portfolio.
Popular examples:
Tether Gold (XAUT): Each token represents one troy ounce of gold, redeemable for physical gold in Switzerland.
PAX Gold (PAXG): Regulated by the New York Department of Financial Services, each token is backed by one fine troy ounce of gold stored in London vaults.
Other examples include Edelcoin (EDLC), Quorium QGOLD, and Token Teknoloji A.Ş. ONS Silver (ONSS), which are backed by various commodities like silver or gold.
Advantages:
Tangible backing: Unlike fiat-backed stablecoins, which rely on trust in government-issued currency, commodity-backed stablecoins are tied to assets that cannot be created at will (e.g., gold or oil).
Accessibility: They make it easier for individuals to gain exposure to commodities without dealing with the challenges of storage, security, or transportation.
Limitations:
Price fluctuation: Since commodities can fluctuate in value, these stablecoins may not be as stable as those pegged to fiat currencies.
Redemption constraints: Physical redemption often requires meeting minimum thresholds and can involve logistical complexities.
Commodity-backed stablecoins remain a niche but growing segment of the stablecoin market, appealing especially to those seeking digital representations of hard assets.
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If they pass this and add it in, then these will be available along with the other stablecoins they create on trading platforms that are regulated in the US. It is also possible that the addition of these commodity stablecoins would increase the price of the commodities themselves as it makes it easier for many to buy and sell them, and they will have to be backed by physical assets themselves.
Comments
I'm not saying all stablecoins that are supposed to hold physical commodities and allow redemption, etc. will be scams, but I have a feeling that this won't end well for a lot of people. I assume at least some of the stablecoin sellers, will be heavy on the selling side and light on the buying side of actual gold and silver.
Philippians 4:4-7
So... how is this much different to SLV and similar ETF's? Guess we have to let them pass the bill so we know for sure what's in it?
Yeah, I'm pretty sure it will not be anything I am interested in. An ounce of gold... in Switzerland or London.... does not do me much good, or give me a feeling of comfort. Good luck in jumping the hurdles to get any actual delivery if you ever want that. Those who own or even 'hold' the gold, tend to not want to give it up.
But good luck to those who are excited about this, and want to play the games.
This is what generational bubbles are made of.
Knowledge is the enemy of fear
There is a generational bubble in gold and silver?
Not yet.
Knowledge is the enemy of fear
Don't see how this is much different than what already happens on COMEX. You can request delivery, and they will still pay you out in funds since they have oversold the silver / gold. This has been the argument of silver holders for years as it makes it able to be manipulated by short sellers.