Opinion by: Kevin Rusher, founder of RAAC
This is a turbulent world. This year, we have seen stocks run wild as gold has pumped and cryptocurrencies are caught in the middle. Investors have dumped risky assets and scrambled for safe havens. Gold leads the expense.
While gold is safe, it is not very hard. Unlike cash and treasury, yellow metals do not generate income. Now, more than ever, investors need to be able to earn yields in gold, especially in the field of diversified finance (DEFI).
The only way to make money from gold is to buy at a low price and at a high price. Most investors won’t buy gold like this. This is for good reason – gold’s performance is usually consistent in the long run, even if not as we’ve seen recently, if not here and there without a few peaks and grooves.
For example, gold prices soared 148% after the 2008 financial crisis, but stagnated for nearly a decade until the pandemic triggered another rally on the 19th, where we would likely see gold holdings, if not once a new record was restored, we would have seen gold holdings. Although it remains an excellent hedge, Gold’s long-term track record is not a growth story.
Investors prefer the U.S. Treasury or high-yield savings account, which is part of a balanced portfolio. Although gold may outperform these assets in uncertain times, it provides a better balance of safe and predictable income over the long term.
DEFI Solutions
This is where Defi brings innovation to the oldest assets in the world. DEFI can significantly modernize gold investments, providing the speed and transparency of blockchain-based transactions and the ability to earn returns.
However, currently, most tokens have roughly the same gold as holding it in an exchange-traded fund (ETF). Stablecoin giants like Tether and Paxos have launched tokens with gold medals, which they say is completely backed by physical, audited gold reserves, but generate no revenue.
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Most Defi investors prefer liquidity, tradeable assets (such as cryptocurrencies and stablecoins) that can produce attractive returns. For example, many people would rather buy Tether’s USDT (USDT) Stablecoin and place it, and get rewards while maintaining ownership.
Perhaps that’s why the market value of gold tokens is still moderate. For example, Tether Gold, the world’s most important gold token, has a market capitalization of less than $835 million, while Paxos Gold has a market capitalization of $799 million. Combined, this is equivalent to 1% of USDT’s market capitalization.
Unlock revenue from the oldest assets in the world
To unlock the full potential of gold, we need to take a step further tokenization by creating a gold that is actively put into use of tokens – borrowing, lending and incorporating load-bearing strategies.
For companies like gold miners, one possibility is to release token versions of their reserves that can become stable reserves that can then be fixed to earn yields. Protocols that utilize their liquidity mechanisms can enable Stablecoins and Reality Assets (RWA) token trading, where holders can take advantage of further earning opportunities across the entire Fefi ecosystem.
In addition to the benefits of earnings opportunities, blockchain technology means that investors in tokenized gold can benefit from the flexibility of 24-hour trading, near-real-time price discovery and near-fixed solutions without compromising asset stability.
The future of gold investment
Perhaps ironically, just as governments around the world began to recognize digital finance, gold has become a very desirable commodity again. As the government essentially approves digital financing, public interest in it will grow. At the same time, the appetite for gold will also increase during these uncertain times.
Defi can bring these trends together and launch natural developments in gold ownership, providing a solid bridge between traditional and digital financing. Although gold in traditional markets attracts investors seeking stability, Defi brings opportunities that do not harm this stability as it brings new and unique earnings opportunities.
Gold has attracted humanity for thousands of years. This is the basis of the myth, the standard of wealth and the hedging of ultimate opposition to uncertainty. But in today’s financial world, it needs to be upgraded.
By integrating gold into the Defi ecosystem, we can unravel its true potential – not only a store of value, but also as an income-generating asset. The world’s oldest safe haven asset is finally on the verge of digital development.
Opinion by: Kevin Rusher, founder of RAAC.
This article is for general information purposes and is not intended to be considered legal or investment advice. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent Cointelegraph’s views and opinions.
