Digital Gold Currency (DGC): What to Know

During bear markets, crypto winters, and possible recessions, many investors are shifting to digital gold currency as a safer investment during market instability. Digital gold currencies offer a liquid option for investing in physical gold, which has proven to fare well during economic turmoil.

If you are looking to shift your investment strategy to include DGC cryptocurrency, you’ll want to learn the benefits and risks of digital gold currencies before investing. By understanding and researching DGC, you’ll be able to diversify and improve your investment portfolio during times of stagflation.

Understanding Digital Gold Currency

Digital Gold Currency (DGC) is an electronic representation of physical gold stored in gold reserves by a private DGC company. The DGC tokens reflect 100% of the physical gold held by the DGC agency.

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Because the DGC directly reflects physical gold being stored, the investor can use the DGC to pay others. DGC companies have existed since the 1990s but have struggled to gain validity because many of these companies have failed. But blockchain technology enabled DGC to become a solid investment option.

Related Link: How to Diversify Your Crypto Portfolio: Best Strategies

How DGC Works

DGC platforms buy physical gold and store the gold as bullion in high-security vaults. The platform then sells its digital tokens as a direct representation of the bullion in the treasury reserves. Investors can buy, sell, and leverage these DGC tokens on exchanges with no limit on minimum investment.

By investing in DGC, you are relieved of transportation, storage, illiquidity, transferability, and volatility often associated with owning physical gold. And you can then exchange your DGC tokens for fiat or other cryptocurrencies with ease.

Benefits of Digital Gold Currencies

There are several benefits to investing in DGC:

  • Storage Security: The companies that offer DGC store the gold in secure vaults for you. You no longer need to worry about theft or locker chargers for protecting your gold because the company does it for you by offering higher security standards than you could do yourself.
  • No Minimum Investment Required: By investing in DGC, you aren’t required to purchase a minimum amount. You can invest as little as you like, making DGC a more accessible investment opportunity for everyone, regardless of social class.
  • Can Use for Collateral: Depending on the lender, you can use DGC as collateral to secure a loan. More and more lenders are accepting DGC because it is backed by gold stored in secure vaults.
  • Easily Exchanged for Physical Gold: Many DGC companies allow investors to easily exchange their digital assets for physical gold, bullions, or coins that can be delivered to your residence anytime.
  • Genuine: DGC is backed by 24K gold that has 99.9% purity that the company ensures.
  • Not Tied to a Monetary Policy or Economic System: Because the token is pegged to gold, its value fluctuates with the price of gold rather than a country’s currency that can be at risk during economic turmoil.

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Risks of DGC

While DGC does have lots of advantages, it isn’t without risk. Here are the most significant risks you should be aware of before you invest in DGC:

  • Lack of Regulation: There isn’t a governing agency that establishes rules and regulations for these DGC companies. You’ll need to research the platform in-depth to determine if it is trustworthy.
  • Storage Time Limits: Many DGC companies require investors to withdraw or sell their DGC within a specified time limit. You’ll want to research the storage time limits before you invest.
  • Investment Caps: Most DGC platforms cap how much you can invest in virtual gold. The average maximum limit is two lakhs. For those who want to invest more, you’ll need to diversify your DGC position across several DGC platforms.
  • Management Risks: Because the market is unregulated, DGC platforms can be run by poor management that is ineffective, underperforming, lack transparency, allow poor oversight, have slack security, or outright scam their investors.
  • Not Universally Accepted: While DGC is gaining traction, not all countries accept or allow DGC transfers.

What Digital Coin is Backed by Gold?

If you are considering investing in DGC, it can be challenging because there are many DGC cryptocurrencies to choose from. Because of the unregulated market, researching the DGC company is critical before investing. While we recommend doing your own research, here are some of the best gold-back cryptocurrencies currently available:

  1. Tether Gold (XAUT)
  2. PAX Gold (PAXG)
  3. DigixGlobal (DGX)      
  4. Gold Coin (GLC)
  5. Perth Mint Gold Token (PMGT)

Will Digital Currency Replace Gold?

While it won’t completely replace gold and other “store of value” assets, Goldman Sachs analysts believe Bitcoin and other digital currencies will gain market share from gold during 2022. They reason that Bitcoin has proven its ability to maintain a “store of value” and provide utility through blockchain technology.

And as blockchain technology increases in adoption, Bitcoin and DGC cryptocurrencies will increase in value as “store of value” assets. If you believe blockchain technology is here to stay, investing in DGC may be a smart way to diversify your investment portfolio.

Related Link: How Can Blockchain Technology Revolutionize the Supply Chain

Is Digital Gold Better than Physical Gold?

When you trust the DGC platform that you buy DGC tokens from, then digital gold does offer several advantages over holding physical gold:

  • Liquidity: You can buy and sell your DGC in real time. This is a huge advantage over holding physical gold, which can be difficult to buy, sell, and leverage.
  • Investment Cost: DGC doesn’t require making fees.

Quantity: DGC doesn’t have a minimum investment requirement but be mindful that some have investment caps.

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DGC is an Excellent Option for Diversifying Your Portfolio

Digital gold currency is an excellent option for investing in gold-backed assets with the liquidity advantages of a cryptocurrency. DGC provides some protection, like gold, during economic downturns and stagflation. But before investing, it’s critical that you research and vet the DGC company to ensure you won’t be rugged on your investment.

Unbanked publishes the latest trends, news, and shifts in the blockchain markets that may influence your investment strategy. We believe in educating investors on blockchain platforms and technology so they can invest wisely.

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