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How to Buy Gold and Silver with Cryptocurrencies

22 Apr 2021 - Bitcoin & Cryptocurrency

Cryptocurrency is a completely digitally operated form of currency and is quite different from other investment commodities, particularly gold and silver. These precious metals are traded in physical form and have historically been used for investment purposes.

However easy it may be to have a precious metal vs crypto debate, many have tried to work their way around it by employing both investments to form a larger one. What if instead of choosing one of the two, you could use one to invest in the other? So, how can one buy gold and silver with cryptocurrency?

Various exchanges now allow for gold or silver-backed crypto to be exchanged but do they give access to buy the actual metals? Firstly, cryptocurrency is a digital currency monitored entirely through computers and is famous for being decentralized (i.e. no authority or government essentially controls it). The ownership of this virtual cash belongs to whoever buys it. It does not come with any terms and conditions.

A straightforward answer to whether you can buy gold or silver with crypto would be “yes”. But it is more nuanced than that. It may be feasible but it definitely comes with its own set of advantages and disadvantages. Bitcoin has surged in demand since its release in 2009 owing to the convenience of its usage. Many businesses have even opted for it as a payment method.

This uproar gave rise to the development of crypto cousins which are other cryptocurrencies either standing on their own footing or trying to compete with Bitcoin. One common way of buying gold and silver through Bitcoin is by using one of the many brokers available for the purpose.

Nonetheless, it is still essential to ensure that “stablecoins” are bought through this means. With the increase in gold prices, the crypto market is shifting focus to crypto-backed gold, and to gold-backed crypto. To counter the impact of high volatility on investors, stable coins have been released. A stable coin is a value of a coin whereby one coin equals one gram of gold.

The present gold rate determines the price of the coin and it also helps monitor any fluctuations. There is a possibility that the rising popularity of crypto increases the coin’s value above the gold but if that fails to happen, they will remain equated. The same stabecoins process applies to silver. Henceforth, buying silver or gold-backed stablecoin is in theory similar to buying the actual metal.

In light of this, when or after making these investments one needs to be attentive towards crypto values as they are highly volatile and continuously fluctuate. The value of Bitcoin experiences more changes than any other currency. Secondly, and most importantly, before diving into this beware of the fact that alongside being prompt these transactions are irreversible. Once you’re in, you usually cannot backtrack.  Lastly, don’t forget all cryptocurrency transactions are public and permanently stored.

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