Gold has been the world's standard reserve currency for hundreds of years. Even as the world has moved to fiat currency, governments and investors alike still look to gold as a reliable alternative. Given recent volatility, though, it may be crypto's chance to step in as a different, perhaps more secure option.
On Tuesday, August 11, gold experienced its largest one-day drop[1] in seven years. Prices per ounce fell by 4.7% between Monday and Tuesday, bringing them down from above $2,000 to $1,932.28. This recent drop isn't the only problem that the precious metal has on its hands, either.
Today's transactions happen so fast and so frequently that gold transfers can't keep up. It's easy enough to transfer tokens representing gold from nation to nation, but moving the actual gold reserves presents a challenge. In the face of these issues, cryptocurrency may provide a solution.
Is Cryptocurrency Less Volatile Than Gold?
Crypto and gold share many similarities, especially in how they compare to fiat currency. Both lack the volatility of fiat currency due to their limited supply, for instance. Gold may not be able to sustain modern markets, though, whereas crypto was born out of the internet age.
Since crypto payments utilize blockchain technology, transaction speed isn't an issue. Some cryptocurrencies also have measures in place, like Bitcoin halving, that proactively defend against inflation[2], helping them remain more stable. Still, crypto does have some issues with volatility that gold doesn't.
Crypto markets are substantially smaller than traditional ones[3], so small movements have a more significant effect. With such a minuscule market, changes in demand affect the value of crypto more heavily. An alternative may be gold-backed crypto, which might offer the best of both worlds.
