Cryptocurrencies and gold prices appear to move in tandem and that has led to higher demand to purchase gold with cryptocurrency. Recently, OneGold, and online gold trading website, announced a partnership with BitPay that will allow crypto users to purchase gold using cryptocurrencies with access through their application. This will help traders avoid having to make two transactions to purchase gold with a cryptocurrency.
Why Trade Gold with Cryptocurrencies?
Gold prices can move in tandem with cryptocurrency. The chart of Litecoin and gold prices generally move in tandem and are correlated. A correlation describes how closely two assets move in tandem with one another.
One of the reasons these products might move in tandem with one another is that both gold and Litecon are fungible, with limited resources and are used as money in place of the dollar. In the case of an economic crisis, both alternative assets would perform well as they might be considered a safe haven asset and are not tied to any government or central bank.
During geopolitical unrest, which has recently reared its ugly head, both gold prices and Litecoin were on the rise. The strike on Iran’s top general by US President Trump, ignited a controversy which will likely continue to perpetuate. While the Iranians quickly struck back by sending ballistic missiles into Iraq hitting a military base, this initial effort could only be the beginning to further geopolitical unrest.
Having the ability to switch between cryptocurrency and gold without having to change your cryptocurrency back into fiat currency is a benefit for crypto traders. This step will eliminate an additional transaction and will more cost-effective for investors.
What is the Bid-Offer Spread?
A bid-offer spread is the difference between was a market maker will purchase a cryptocurrency and where they will sell a cryptocurrency. The goal of the market maker is to capture the difference. This allows a market maker to generate gains without charging an additional commission. Bid offer spreads on fiat currencies are generally very tight. The spreads that are charged when you are changing one cryptocurrency for another is also generally tight. Unfortunately, many times when traders are exchanging a cryptocurrency for a sovereign currency (like the US dollar) the bid-offer spread can be wide. In some cases, 3%. If a trader wants to purchase gold and needs to exchange from Litecoin to the US dollar and then purchase gold, the bid-offer costs will occur on two transactions.
How Will Bitpay Exchange Cryptocurrency for Gold?
The news of the integration between BitPay and OneGold will now allow traders to hold their assets in either cryptocurrency or gold and still have access to make payments through Bitpay which is a service provider that currently supports over 30,000 merchants, including Microsoft and Avnet. This will likely be more cost-effective and avoid forcing traders to make multiple transactions when looking to purchase gold with a cryptocurrency.