If you were to only read the mainstream media, there’s a good chance that the idea of investing in crypto would be something that offers little appeal.
According to most reports, crypto is a financial Wild West, characterized by illogical volatility, whose bubble has already burst, and investing money in the space is simply asking for trouble.
These kinds of messages may make good headlines, but if you dig a little deeper, the reality of the current crypto sphere is so much more than the volatility and a lack of clear regulation.
At the time of writing, the total market capitalization of the entire cryptocurrency market is just under $2 trillion. In September 2020, the total crypto market cap was $770 billion.
To put this in even greater perspective: the market cap for Bitcoin alone is now over $800 billion, more than the total figure for the entire industry just one year ago.
The numbers are staggering and simply don’t lie, but what is really behind this surge?
The Big Dogs Come to Eat
One of the leading factors behind the massive growth of the market cap is the increasingly high number of institutional investors moving into crypto in the last couple of years, and this greater appetite for crypto has translated into other traditional financial sectors too.
Deutsche Borse AG, which operates the Frankfurt Stock Exchange, recently launched bitcoin futures via its Eurex derivatives exchange. And payments facilitator giant Visa is actively working with exchanges worldwide to enable the smoother flow of funds from crypto accounts to real-world transactions.
Coinbase’s second-quarter letter to shareholders reported the turnover of cryptocurrencies hit a record $462 billion in the three months to June 2021. $317 billion of this total was generated by institutional investors, a massive shift from just a few years ago when retail investors made up the greatest share of cryptocurrency trading.
Fear of the Unknown
Crypto is clearly on the rise. However, Bitcoin and Ethereum still dominate the market, and the volatility in these coins is something that many old-school investors simply don’t want to expose themselves to.
With that in mind, the rise of asset-backed tokens offers an ideal entry point to the sphere for investors who want to experience crypto without so much of the volatility major tokens often experience.
The beauty of asset-backed cryptos is that they are tied to a tangible real-world asset. These assets are growing by the day, but the most popular to date have been those tied to fiat currencies, gold, other commodities, and real estate.
Perhaps the most attractive part of asset-backed tokens is that as real-world assets back them, they don’t experience as much volatility as Bitcoin or Ethereum.
There is no official US digital dollar, but some of the most well-known asset-backed tokens are tied to the price of 1 US dollar.
By far the most popular dollar-backed token is Tether (USDT), so-called because it “tethers” itself to the value of the USD, which in turn reduces its volatility.
Interestingly, Tether is backed by more than just the dollar. Its value is backed by gold, traditional currency, and cash equivalents.
Tether is also known for its high levels of security and smooth integration with crypto to fiat platforms.
Gold-backed crypto tokens are one of the fastest-growing sectors, but this is also an area where first-time investors can encounter many problems. The price entry points can often be too high for regular investors, and the claims to the actual gold behind the asset can sometimes seem a little hard to work out.
One project that counters all these issues is the AABB Gold Token (AABBG), launched by Asia Broadband, Inc. (OTC:AABB). A unique aspect of AABBG is its vertical integration of Mine-to-Token gold-backing, making it unlike any of the other gold-backed cryptos out there. This unique feature means AABB holds verifiable physical gold assets that back the AABBG token 100% from the company’s mining production segment.
The minimum token price of AABBG is linked to the current spot price of gold, which means the token benefits from the lower volatility of gold relative to the cryptocurrency space, offering a sense of stability. At the same time, token holders can benefit from both gold and cryptocurrency features, leading to the potential for price appreciation from both markets.
One of the most interesting asset-backed token projects is not actually operational. Petro (PTR) was the name for an oil-backed crypto project run by the government of Venezuela.
The Venezuelan government claim that over $700 million of Petro was sold upon launch in 2018, with the price of 1 Petro equating to one barrel of Venezuelan oil
The big problem with this project was that much of the Petro white paper seemed to have been copied and pasted from another project, and the oil that backed the Petro was yet to be drilled.
While certainly an exciting idea and one that another oil-rich state could revive in the future, Petro has been a failure so far.
Despite what the mainstream media would like to suggest, the crypto market has never been healthier, and its value is projected to triple within the next ten years.
It’s no surprise then that the companies whose business is to make money are sending more and more of their funds in this direction.
For retail investors still not convinced that crypto is for them, asset-backed projects such as Tether and AABBG offer an exciting opening into the sphere.
Asset-backed tokens safely bring investors into the crypto world with projects that offer excellent opportunities for gains but without the wild volatility that can feel scary for those new to this world.