As economic and regulatory scenarios change, macro uncertainty was felt on crypto and traditional markets in the early months of 2022.
Investors view gold historically as an asset to have in their arsenal when stocks and bonds fall. As the U.S., UK and other countries decided to increase their military spending, it is no surprise that gold prices have reached a 19 month high. ban Russian energy Products. Investors are now attracted not just to the metal but also to tokens that have gold backing.
Macro Uncertainty and Crypto: What Crypto Can Look Forward to
The macro uncertainty has only increased in 2022, starting with Russia’s invasion of Ukraine, then escalating as the sanctions on Moscow have a direct effect on commodities prices. Analysts expect that the CPI numbers will reflect a rise in U.S. inflation, which is expected to be released next Thursday.
Arcane Research data showed that CPI was expected to rise to 7.9%. The Federal Reserve could also perform the 25 basis-point rate hike chair Jerome Powell indicated he would support.
Bloomberg experts however project for “February CPI to show an increase of 8.0% year over year and top out in the vicinity of 9% in March or April,” and added that “CPI could rise above 10%” if energy prices continue to rise.
The Fed also stated they may move faster if inflation continues to rise. If the market’s expectations on the rate hike do not meet reality, crypto prices could see increased volatility.
Arcane Research noted that the Russo–Ukrainian War on the soaring commodity prices could become a race against the clock for central banks to lower inflation.
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60% Growth For Gold-Backed Tokens
Arcane Research has also revealed a huge increase in tokens backed by gold for 2022. As investors seek safety as a way to hedge against future risks, the macro uncertainty has caused the gold price surge by 11% in 2018.
The gold price rally could be calling the investors’ attention towards the top gold-backed tokens. They have a market capitalization of $1 billion and are expected to grow by 60% in 2022.
As per Investopedia, “Gold-backed digital currencies link one token or coin to a specific quantity of gold (for instance, 1 token equals 1 gram of gold),” and “If the digital currency becomes popular, the price of the coin can actually exceed that value. In this way, gold-pegged digital currencies offer protection against the bottom dropping out of a digital currency’s value.”
Tether Gold, PAX Gold, and Tether Gold are two of the most popular gold-backed tokens. As shown in the below chart, Tether Gold saw little growth over the past year. PAX Gold, which experienced a large influx in February, took its place in market cap.
However, there is only 0.05% of total crypto market share that has gold-backed tokens, which is small compared to top cryptocurrencies.
Bitcoin?
The report also notes that “Bitcoin has underperformed in this uncertain macroclimate, but many investors still view it as an inflation hedge.” Bitcoin price is up 8.93% in the last 24 hours after President Joe Biden announced the executive order on digital assets, which took a benefitial position for the crypto industry.
Related reading: Battle Of The Hedges. How gold and bitcoin have performed with Russia-Ukraine conflict| Battle Of The Hedges: How Gold And Bitcoin Have Performed With Russia-Ukraine Conflict
