Wall Street says tokenization will change global markets. Gold is next.
The rise of gold (GC=F) to all-time highs this year has led to increased appetite for tokenized bullion as investors look for ways to engage in “adulteration trading” via blockchain.
The precious metal issued in token form uses the same technology that powers cryptocurrencies; The issuer guarantees that the tokens are backed by physical gold that is securely held and designed to closely reflect the price of gold.
While gold rose to new highs in October, stablecoin issuer Tether saw: Up to 60 percent increase in the value of gold tokens (XAUT). Tether stated that XAUT’s market value increased from $1.44 billion to $1.44 billion at the end of last quarter. approximately $2.1 billion last month, before the gold sell-off.
Tokenized gold currently accounts for just 1% of the broader real-world asset market. The market cap of stablecoins backed by the US dollar or short-term Treasury bonds is around $300 billion, while tokenized gold represents around $3 billion. led by Tether’s XAUT and PAX gold.
Read more: Are you thinking of buying gold? Here’s what investors should pay attention to.
“This is an alternative way for people to hold their gold if they prefer to keep it somewhere. [digital] “With this wallet they can trade 24/7, peer-to-peer transferability,” Will Peck, head of digital assets at WisdomTree, told Yahoo Finance.
Another benefit is the potential to be used as collateral for loans.
Fintech company “The depreciation of the US dollar continues” Fireplace CEO Ian Kane said: “To be able to buy gold, to be able to get a loan against it, to have capital where my loan actually generates additional returns, and I don’t have to worry about my principal depreciating or losing value, that becomes really compelling.”
While tokenized gold could theoretically be converted into physical gold or traded like any other cryptocurrency, Peck sees it being used in a similar way to Bitcoin (BTC-USD), with both assets co-existing as ways to hedge against inflation.
“Both gold and Bitcoin have done well in a world of widespread money printing. They serve different but complementary roles as structurally deflationary assets,” Peck added.
The tokenization push in the US has gained momentum this year alongside new legislation that has led to a rise in stablecoins, or digital tokens pegged to the US dollar.
The crypto industry, along with Wall Street heavyweights, are looking to bring this trend to the mainstream. Robinhood (HOOD) CEO Vlad Tenev recently compared tokenization to an unstoppable “freight train.” BlackRock (BLK) CEO Larry Fink said in a company newsletter over the summer that the concept would “revolutionize investing.”
