Can Gold Be An Answer To Fight Back Extreme Volatility in Cryptocurrency Market?

No wonder, the cryptocurrency market is extremely volatile. Every possible effort is being put in on futuristic products and protocols in order to mitigate this extreme volatility. Let's talk about the most famous cryptocurrency and also the current favorite of many – Bitcoin. The fact that this digital currency comes with no physical backing of value draws all the criticism. Contrary to how fiat currencies are pegged to a stable asset, cryptocurrencies aren't. Blockchain technology deserves all the credit for being the major contributor to the popularity of cryptocurrencies. Gone are the days when Blockchain technology was limited to mere trading. Today, this technology has made a lot of industries rely on it for several purposes.

Talking about how promising the cryptocurrency market has been for the investors, both in terms of volume and value, in the last couple of years needs no special mention. Yes, people made huge profits by virtue of the rising demand for cryptocurrencies but the fact that there have been bad days too wherein the market bled badly cannot be overlooked as well.

As far as gold is considered – let's start by throwing light on the world's reserve currency, USD. Not known to many but the USD has been backed by gold for a good period of time. Though the demand and popularity of cryptocurrencies overshadowed the performance of gold, what is worth a mention is that gold has had its unique way of standing apart from the rest. It has been a silent performer all this while. Contrary to how cryptocurrencies get impacted as a result of tweets pertaining to crypto and inflation for fiat currencies, gold is relatively on the safer side – thanks to the fact that there are negligible factors that can disrupt the value of gold. Its consistency, ability to beat inflation by a fair margin, and high liquidity among others are the reasons why gold is considered to be an ideal commodity for cryptocurrencies to be pegged to.

Let's now talk about – Can gold be an answer to fight back the extreme volatility of the cryptocurrency market?

The regulatory uncertainties have always been a cause of concern for cryptocurrencies. But with gold being a universal asset, an opportunity to ease the acceptance of cryptocurrencies opens up. As fiat currencies have to fight inflation every now and then, no second thoughts about how well the gold-backed crypto can be the new medium of exchange for institutions. Addressing the issue of scarce knowledge pertaining to the cryptocurrency market, the gold-backed cryptocurrency is a step to ensure that the participants entering the market are knowledgeable about their investments.

Not only will the cryptocurrencies enjoy liquidity, benefits of security and transparency can also be reaped in, thanks to blockchain technology. The minimal fluctuation in the price of gold is yet another reason why such an investment would be worth it all. The ability of gold to hold its value even during recessions and economic failures when combined with cryptocurrencies would result in a combination of stability and accessibility.

All in all, the coexistence of gold and crypto could be an excellent way to mitigate extreme volatility.