Apart from its function as a payment vehicle, using bitcoin in trading and investment activities has also emerged as a strong role. In particular, investors are looking to trade gold using the cryptocurrency and there are several ways to do this.
Gold is often treated as a storage value, as the limited supply in the world guarantees that the value will continue to appreciate due to scarcity. It is also seen as a hedge against inflation, with traders buying more of the precious metal when price levels are rising.
Using Bitcoin for Gold Trading
Bitcoin is also considered “digital gold” because it shares the same scarcity property as the precious metal. There are only a limited amount of bitcoin that can be mined, leading many to believe that its value will continue to rise in the long run.
With that, some have ventured into trading gold using bitcoin. For instance, San Francisco-based company Serica, which was formerly known as DigitalTangible, has launched the first gold-bitcoin exchange last year to cater to the growing demand for trading gold against the cryptocurrency.
Serica makes use of counterparty tokens or colored bitcoins to act as proof-of-ownership for gold, which are actually physically stored in vaults in Delaware or Singapore. The company also pays bitcoins to sellers who mail their gold through their Bitcoin4Gold feature.
Vaulturo is another bitcoin-gold exchange that is based in Switzerland. This exchange has three types of wallets, namely the hot wallet hosted online and used for daily trading activities, the warm wallet for auditing purposes, and the cold wallet which hold most of the users’ funds.
Meanwhile, Thailand-based Midas Reserv offers MRCoin, which is a meta-cryptocurrency also known as colored bitcoin. This corresponds to one gram of gold bullion, which are also physically stored in various vault locations around the world.
These companies show that one can trade or own gold using bitcoin without having to resort to physical exchange but still retaining the security of holding the asset.