The current economic scenario has awakened gold bulls in the financial markets. Fears of an economic recession and currently high inflation are pushing gold prices higher.
In this particular context, investors seem to have a new weapon to their credit: gold-backed cryptocurrencies. These assets aim to make the most of two distinct worlds. These projects want to merge the growth potential of cryptocurrencies and the safe haven function of the gold market.
Gold and Economic Stagflation
This year, consumers, investors and economists are all concerned about more than just the rate of inflation. Stagflation could appear if growth slows and unemployment rises.
Stagflation occurs when the economy slows down, demand declines, and unemployment rises while inflation rises. This circumstance is unusual because unemployment is normally bad for economic development. Inflation tends to fall along with a fall in demand.
Investors might wonder how to protect their assets in such a difficult time. When we look at the gold market, we see different forces driving the prices of the precious metal. Some of these drivers include:
- Fear of an economic crisis: The subprime crisis in 2008 saw the bankruptcy of several financial institutions. As this crisis has evolved, the price of gold has seen a dramatic rise in the market.
- Fear of high inflation: In the 1970s, a substantial increase in inflation pushed gold to new highs.
It should be considered that stagflation is the combination of the two factors above. Therefore, it is no wonder that investors have been watching gold with interest lately.
The idea behind gold pegged cryptocurrencies
A simple way to explain how gold-backed cryptocurrencies work is to make a comparison to the derivatives market. As a derivative asset, a cryptocurrency price can be directly linked to the price of gold in financial markets.
To get the best of both worlds, one can tie the price of a token to a predetermined gold supply. This new type of cryptocurrency aims to combine the security of gold with the extended utility of a token.
It is possible to consider these tokens as a concept not too far removed from stablecoins. A stablecoin aims to preserve its peg with fiat currency. On the other hand, gold-backed cryptocurrencies use gold as the floor price for a digital token.
A crypto project supported by Asia Broadband
Metals mining and trading company Asia Broadband, Inc. (OTC: AABB) is a United States-based company that focuses its business on Asian markets.
The company launched the AABB Gold Token (AABBG) to enter a growing market. AABB’s gold reserves support the value of this cryptocurrency.
Asia Broadband’s total assets exceed $100 million. Over the past year, the company has sold around 500,000 tokens at an average price of $6 per coin. The project collected over $1 million in sales in the first 15 days of trading.
Investors can benefit from an uptrend in the gold market while eliminating volatility through this price floor. The current situation of rising inflation and falling fiat currencies still supports this thesis.
The fact that Asia Broadband has a long history in the gold industry is a significant advantage. Investors should keep this aspect in mind even though it is not a guarantee of future profits.
Provide 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 few months, the AABB Exchange has grown dramatically, with over 400 coins offered.
AABB charges a small fee for each transaction and guarantees never to ask customers for personal information.
Additionally, users can send AABBG via SMS or email using the iTransfer feature.
In order to broaden the appeal of the coin, the company created a mobile application. Through AABB’s wallet, users can send and receive crypto anonymously.
The PayAABB system is one of the company’s most recent announcements. Loyalty programs, which stores can 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 continue to gain momentum.
Stagflation is creating positive expectations for the gold market, and we will see how this economic scenario plays out. The introduction of gold-backed cryptocurrencies represents a new way that investors can use to try to collect profits from the market.
AABB’s gold-backed token may see its value increase due to increased demand. Blockchain technology has eliminated the need to deal with brokers or hedge funds when it comes to precious metals.
On the project website or social media accounts (Reddit, YouTube and Twitter), readers can follow the latest announcements.