The current economic scenario has awoken the gold bulls on the financial markets. The fears of an economic recession and the currently high inflation are pushing the gold prices up.
In this particular framework, investors seem to have a new weapon under their belt: gold-backed cryptocurrencies. These assets aim to take the best features from two distinct worlds. These projects want to merge the growth potential of cryptocurrencies and the safe-haven feature of the gold market.
Gold and Economic Stagflation
This year, consumers, investors, and economists are all concerned about more than simply the inflation rate. Stagflation might emerge if growth slows and unemployment rises.
Stagflation occurs when the economy slows, demand declines, and unemployment grows while inflation rises. This circumstance is unusual because joblessness is normally bad for economic development. Inflation tends to fall in tandem with a decline in demand.
Investors could wonder how to protect their assets in such a difficult period. When we look at the gold market, we observe different forces driving the precious metal’s prices. Among these drivers, we can mention:
- Fear of an economic crisis: The sub-prime crisis in 2008 saw the bankruptcy of several financial institutions. As this crisis evolved, the gold price recorded a spectacular increase on the market.
- Fear of high inflation: In the 1970s, a substantial inflation increase pushed gold to new highs.
We should consider that stagflation is the combination of the two factors above. Therefore, it is no wonder that investors have been looking at gold with interest lately.
The Idea Behind Gold-Pegged Cryptocurrencies
An easy way to explain how gold-backed cryptocurrencies work is to make a comparison with the derivative market. Like a derivative asset, a cryptocurrency price can directly link with the price of gold in the financial markets.
To get the best of both worlds, one can link the price of a token to a predetermined gold supply. This new type of cryptocurrency aims to combine gold security with the wide-ranging utility of a token.
It is possible to think of these tokens as a concept not too far from stablecoins. A stablecoin aims to preserve its peg with a fiat currency. On the other hand, gold-backed cryptocurrencies use gold as a price floor for a digital token.
A Gold-Backed Crypto Project by Asia Broadband
Metals mining and trading firm Asia Broadband, Inc. (OTC:AABB) is a US-based company focusing its activities on Asian markets.
The company has launched the AABB Gold Token (AABBG) to penetrate a growing market. AABB’s gold reserves back the value of this cryptocurrency.
The total assets of Asia Broadband exceed $100 million. Over the past year, the firm sold about 500,000 tokens at an average price of $6 per coin. The project collected over $1 million in sales during the first 15 days of trading.
Investors may benefit from a bull gold market trend while eliminating volatility through this price floor. The current situation of rising inflation and declining fiat currencies still supports this thesis.
The fact that Asia Broadband has a lengthy history in the gold industry is a significant plus. Investors should keep this aspect in mind even if it isn’t a guarantee of future profits.
Providing Multiple Services to Gold and Crypto Investors
Asia Broadband launched a crypto exchange earlier this year. Coins like BTC and ETH are available for trading using the AABBG token on the platform. Over the past several months, the AABB Exchange has grown dramatically, with over 400 coins offered.
AABB charges a small fee for each transaction, and it guarantees to never ask for personal information from its customers.
Additionally, users can send AABBG through SMS or email using the iTransfer feature.
In order to broaden the coin’s appeal, the business created a mobile app. Through AABB’s Wallet, users may send and receive crypto anonymously.
The PayAABB system is one of the company’s most recent announcements. Loyalty programs, which shops may adopt, will allow customers to earn cashback. For businesses, Asia Broadband has launched a new crypto payment processing service.
AABB Wallet will be able to conduct B2B and B2C transactions using the company’s Merchant API. Due to Asia Broadband’s big goals, the project hopes to keep gaining traction.
Stagflation creates positive expectations for the gold market, and we will see how this economic scenario will evolve. The introduction of gold-backed cryptocurrencies represents a new way investors may use to try and collect profits from the market.
AABB’s gold-backed token might see a rise in value due to increased demand. Blockchain technology has eliminated the need to deal with brokers or hedge funds when dealing with precious metals.