Ready for trading some cryptocurrencies? But skeptical about the potential risks associated with pegged currencies? Here’s our comprehensive and detailed analysis of two premium Stablecoins; Gold-pegged and USD-pegged cryptocurrencies.
What Are Gold Pegged Cryptocurrencies?
Gold pegged cryptocurrencies are assets achieving valuation by comparison to gold and fluctuating accordingly, as stated by the bitcoin loophole website. One coin of specific cryptocurrencies is linked to the quantity of gold held in reserves by third-party organizations or custodians.
Pros of Gold Pegged Cryptocurrencies
- Stable Value: Gold backing is beneficial as it sets the minimum value of any coin to the fixed value of Bullion. Therefore the speculative cryptocurrency becomes linked to much more material assets. If the value of the digital currency diminishes, it still is protected by the baseline set by gold, and thus, becomes more stable than mainstream tokens. This is attracting investors who are trying to curtail losses due to the diminishing value of fiat currencies.
- Can Be Fragmented: Gold-backed cryptos can easily break into units to transfer, making it easier to store or sell.
- Trading On Blockchain Apps: One can trade gold tokens of blockchain across many blockchain applications.
Cons of Gold Pegged Cryptocurrencies
- Storage: The supply and storage of considerable quantities of physical gold in reserves raises risk. Therefore it is advisable to inspect the reserves of any particular crypto. The value of the crypto vanishes if the gold is withdrawn.
- Limited Liquidation: Gold-backed cryptos are new in the market resulting in trading in only limited exchanges.
- Scams: Just with any financial asset, common for parties to misinform about the gold backing they claim to reserve. Investors must beware of the possibility of such misrepresentation and ascertain the pegging with valid proof.
Here Are the Top #5 Gold-Pegged Cryptocurrencies:
- Tether Gold (XAUT)
- Perth Mint Gold Token (PMGT)
- Paxos Gold (PAXG)
- Digix Global (DGX)
- Meld Gold by Algorand
What Are USD Pegged Cryptocurrencies?
USD pegged cryptocurrencies are paralleled with US dollars, where each USDC is pegged by US dollars kept in reserves.
Pros of USD Pegged Cryptocurrencies
- Faster Payments: USD pegged cryptocurrencies require lesser time for payment completion, unlike other cryptos.
- Fixed Fees: The transaction fees for USD pegged cryptocurrencies are fixed and don’t spike if the transactions do.
- Secure: USD pegged cryptocurrency is safe and secure as compared to bank Dollars. Bank servers maintain hash files of user passwords which is susceptible to hacking. Contrarily, theft of USD pegged currency is not possible.
Cons of USD Pegged Cryptocurrencies
- Skeptical Governments: Governments are also unwilling to associate cryptos with the traditional centralized currency of any particular country. However, regulation and distribution of licenses can be solutions to such hesitation.
- Not Commonly Accepted: USD pegged cryptocurrencies are still not accepted as an indifferent mode of payment by many merchants. Due to their risks, USD pegged currencies are harder to trade in day-to-day transactions.
- Storage: There are also risks in the storage and transport of a considerable amount of cash. Reliable Fiat currencies hold tough competition against cryptocurrencies as they hold the same value for longer and are centralized in nature.
Here Are the Top #5 USD-Pegged Cryptocurrencies:
- XRP or Ripple
Hindered by few shortcomings, cryptocurrencies are still multiplying and creating new markets for everyone by promising instant processing of digital coins and stability of fiat currency while more and more products are being developed around.
Disclaimer: This article is solely for informational purposes and expresses the limited knowledge and opinion of the author only. Please understand all the risks associated with cryptocurrencies before making any financial decision or action.