Fiat currency has become unstable since the financial crisis of 2008. We are all still feeling the legacy of this instability.
Fiat currencies are legal tender. The problem with them though is that fiat currencies are not backed by a physical commodity. That creates a clear distinction between it and commodity money.
Physical goods like gold bars and silver give commodity money its value. Governments and central banks can’t print gold and silver at will like they can with fiat money. That’s where the problems begin.
The problem with fiat currencies
There can be a number of different reasons why the public loses faith in their country’s fiat currency. One example of this is what happened in Zimbabwe in the 1990s when hyperinflation massively devalued the currency. Below, we discuss how this happened.
The introduction of disastrous land reforms
Robert Gabriel Mugabe was Zimbabwe’s president. Under his rule, economic conditions had begun to deteriorate fast. Mugabe started a series of land reform programs. However, many argue that this was a political move to distract people from the economic problems the country faced.
The economy began to fail badly and the value of the Zimbabwean dollar started to crumble. Eventually, the country scrapped its own currency and started to use the US dollar in 2009.
Unlike this example, Kinesis uses gold as the traditional store of value. It is making gold a reliable global currency once again. This is possible thanks to the technology behind cryptocurrency: blockchain. The technology that enables the trading and spending of Kinesis gold on a global scale.
Many people around the world are now using cryptocurrency as a digital medium of exchange. The market for cryptocurrencies has rapidly grown in popularity. In 2017 alone, the total value of cryptocurrencies was $600 billion. Now in 2023, it’s closer to $1.19 trillion.
One billion people around the world have used a crypto exchange and 300 million own crypto. It’s remarkable how ground-breaking and popular it’s become.
Owning crypto may be the right decision for you. That’s especially so if you make online transactions often, and don’t like waiting on the bank to clear funds. Crypto can reduce the risk of fraud too. That’s because you cannot transfer a cryptocurrency without user permission.
Third parties cannot manipulate your transactions, you have complete control over your accounts. The blockchain hosts all your crypto accounts.
The blockchain is a form of independent ledger that ensures transparency and consistency. It’s so safe that many banks around the world are adopting the technology.
To learn more about why you should buy silver and gold using cryptocurrencies and how to do it online, keep reading.
Why is gold a good long-term investment?
Fiat currencies lose their value through the years, either gradually or in a snap.
If people trust another currency more than their own, confidence in that currency collapses. Its value does as well, as we saw in the Zimbabwe example.
Gold uncoupled from the dollar
Investors and financial institutions may trust gold-backed cryptocurrencies more than fiat currencies. Crypto enthusiasts now view digital currencies as “better money”. They may, over time, come to trust gold-backed cryptocurrencies more than even the US dollar.
In 1971, President Nixon decoupled gold from the US dollar. The “gold standard” was no more. Since then, the Federal Reserve, America’s central bank, has printed more and more dollars. Banks and financial institutions have also created more money by lending out a greater proportion of savers’ deposits.
The plunging value of the dollar
First, there was the Great Financial Crisis of 2008. Second, there was the reaction to COVID-19. Between 2008 and now, the U.S. has printed vast amounts of money backed by nothing but faith in the government. This has been a big reason why the U.S. dollar lost 29% of its value in that time.
Further complicating matters is interest rates. Traditionally, raising interest rates has had a negative effect on the price of gold. But with so much printed money circulating, that effect no longer seems as strong.
For example, the Fed fund rate was 0.25-0.50% in December 2015 when the gold price was $1,078. The rate went up to 2.25-2.50% in December 2018, but the price of gold was £1,277. We can see the opposite of what normally happens took place.
The U.S. is the world’s largest economy. Printing money is less dangerous for them than it is for a country like Zimbabwe. However, this is something we should all worry about. If there is a loss of confidence in the US dollar, it will affect its value and the value of all other currencies.
Why people still invest in gold and silver
To protect against this, many astute investors and other entities consider it smart to purchase gold bullion. Another approach is to buy gold-backed currencies instead.
A return to the gold standard offers the following reassurances:
- Its gold or silver backing provides it with values, unlike common fiat currencies.
- It could help the economy to achieve excellent stability and self-regulating capacity.
- The finite amount of gold and silver limits the supply to the reserves available. This creates a stable volume of gold and silver-backed crypto that governments can’t debase by issuing more.
- It could discourage government budgeting problems, debts, and even inflation.
- Encourages a nation to be more productive, which could help it earn more gold for its reserve.
Returning to the “gold standard” as existed before 1971 could stabilize economies and solve monetary problems. When fiat money such as the US dollar collapses, it could help people, governments, or even a nation remain.
A handful of experts believe in gold-backed currencies. They have been developing new ways for people who want to invest in silver or gold. One way they’re doing this is the blockchain, which is becoming more and more popular throughout the world.
How blockchain will power the gold revolution
Everyone knows that gold is a valuable asset. Its value holds its own and increases over the centuries. Because countries have used it in the past as a currency and still believe in its value today, gold prices have historically risen.
History shows time after time that commodity money is more economically powerful than fiat money. Gold is undoubtedly the best asset to back any commodity currency. This makes people find ways to invest in gold and use it for their day-to-day transactions.
The problem is that it’s not easy to acquire, store, or move gold. All processes involving real gold are expensive. This has motivated innovators to find new platforms where they can use gold efficiently as a currency.
The power of the blockchain
The blockchain is the platform that has contributed to the boom of cryptocurrencies. The blockchain allows the buying and selling of crypto and records all transactions.
The problem is that top cryptocurrencies are also fiat coins. This has led to the notorious volatility and instability in crypto pricing.
The blockchain is an effective and elegant solution as a transaction ledger. The problem is digital assets’ lack of backing. So there have been moves to transform fiat cryptos into gold-standard currencies.
This has led to the creation of gold-backed cryptocurrencies, such as Kinesis’ precious metals-backed currencies that run on the blockchain.
This type of crypto has real gold and silver backing up its value. There is an equal amount of digital coins to the amount of gold in the Kinesis global vaulting network. For example, 1 KAU is equal to 1 gram of fully insured, audited gold bullion.
For some, the easiest and best way to invest in silver and gold is to use them on the blockchain. If you want to use these coins as currency on certain transactions, you can. Investors benefit from this without compromising security, thus keeping their crypto safe.
Now, you can hold gold as part of your investment portfolio and use it as a currency for buying and selling. The blockchain makes this more efficient and less expensive. It’s how people, investors, and institutions can store and move gold more easily.
A new way of buying, selling, and investing
When they’re comfortable with silver and gold investing, they can start to reap the benefits. They now have the security of using gold standard currencies and an easier way of buying and selling them through the blockchain.
You still have the option of investing in gold mining companies and buying gold in the more traditional ways. However, stablecoins or gold-backed cryptos are currently the best options.
How to invest in gold and silver
We’ve thoroughly explored how volatile fiat currencies are. They’re more volatile than the stock markets. You may have started to explore how to invest in gold and silver.
If there is a collapse in the fiat currency you use, you don’t want it to harm you too much. The best way to protect yourself is to have your own robust stash of gold and silver.
Holding gold and silver
First, you might consider buying enough gold and silver to establish a personal reserve. If there is a collapse in the value of your fiat currently, you can then sell it on so you have enough cash to buffer yourself.
If a gold standard currency replaces your current fiat currency, you can easily trade your precious metals for it.
This approach proves highly beneficial if a gold standard currency becomes accessible to you. Unlike other commodities, trading your precious metals for it becomes a straightforward task.
Before you invest in silver or gold, however, you need to consider several things:
- Where are you going to store them?
- Do you have a secure vault in your home?
- What will you use the gold for?
- Who will accept your gold as money?
- Can you afford to pay premiums and taxes?
- Don’t you think you’re better off with gold jewellery than gold bullion?
If, after doing your due diligence, you want to hold the precious metals you purchase as a result of your gold and silver investing, find a dealer. Make sure they sell bullion, bullion coins, and ingots at the right gold price.
Then, choose from a range of bullion.
- Coins are the most common form of bullion that look like actual coins. They are still often used as currency. There is a limited production of gold coins which makes them rare and expensive.
- Rounds may look like coins but they lack circular value. However, the size of the round bullion will impact its value inversely since it is based on precious metal content. So, the smaller the rounds are, the higher their premium rates over spot.
Bars are popular among investors because of their low premium over spot, similar to rounds. They are also easier to store, stock, and organise. They are best purchased in bulk.
Another way to invest in gold or silver is to put your investment in gold mining companies. Choose the right firm whose prospects match your risk appetite and investment goals.
Real assets like gold and silver provide backing and value to many stablecoins. An example in the crypto space is the USDT coin. Fiat currencies back the other major type of stablecoins.
You need to first find the right stablecoin, whether it’s metal-backed or currency-backed. Kinesis, a metal-backed crypto. Once you do this, you’ll get a digital coin for each unit of real gold or silver you have stored safely.
This setup not only gives you a secure investment but also allows you to use your digital gold for everyday spending. So, even if the regular money you use loses value, your digital coins backed by gold will hold their worth.
Investing in precious metals with Kinesis money
If you want to invest in gold online, you can with Kinesis. However, investing in stablecoins backed by precious metals is an even better move. This can help you a lot to have a secure investment and experience using gold and silver efficiently for regular daily transactions.
For every currency you buy, the ratio is as follows:
- 1 gram of gold to 1 KAU
- 1 ounce of silver to 1 KAG
Investors will receive KAU and KAG upon investing, thus ensuring they own a certain amount of precious metals under their account.
We provide insurance for the 1:1 allocation of your gold and silver. We keep them in third-party vaults that are completely independent of Kinesis. There are third-party audits every six months on the precious metals we hold for you.
Gold and silver investment with Kinesis enables you:
- Full and direct ownership of the legal title to the bullion
- Fully redeemable assets
- Free storage in a secure vaulting network
Invest in Kinesis gold coins
To invest in gold-backed crypto through Kinesis, you can open a free account on the platform.
When you invest in Kinesis gold it is always fully allocated and redeemable. You can use this gold to buy goods, services, or for crypto trading, among other things. Your gold is safely stored in a secure vaulting network and you can redeem the physical gold anytime you wish.
Invest in Kinesis silver coins
You can also invest in silver coins with Kinesis. Every Kinesis silver KAG is backed by 1 ounce of physical silver. To purchase this silver-backed cryptocurrency, you’ll need a Kinesis account.
You can use KAU or KAG in everyday life like real money on the Kinesis Card. As long as the retailer accepts Mastercard, you can spend gold, silver and crypto with instant conversion to local currency at the moment of purchase.
Set up Your eWallet
First, you’ll need an Ethereum ERC20-compatible eWallet to buy Kinesis currencies. Options like MyEtherWallet, Mist, Parity, imToken, Trust, and Cipher are suitable. Kinesis also offers the Kinesis CoolWallet and CoolWallet Pro.
Do your research before picking a secure, reliable eWallet. Kinesis can’t take responsibility for any issues you might encounter using it.
Don’t use a cryptocurrency exchange address or eWallet to get Kinesis KVT. That’s because they often don’t support ERC20 tokens and KVT requires an ERC20-compatible eWallet.
Kinesis has other helpful features. We can advise you on growing your stablecoin stocks so you can increase your account’s gold and silver.
Difference between physical and crypto gold
Physical gold and crypto gold are essentially the same in terms of value. They’re both speculative investments and safe-haven assets.
However, they are different in some ways. Physical gold is tangible and has been a form of currency for over 2,000 years.
Miners are responsible for gold and silver production and they bring more of it to market every year. Manufacturers use the metal for various purposes, such as creating jewelry. Investors can buy it in the form of bullion or using financial instruments. Two such instruments are gold futures contracts and exchange-traded funds.
The more gold miners find, the greater the supply. It’s also put to use by different types of companies like jewelry makers.
For investment, you can buy it in various forms like bullion. You can also invest using financial instruments like gold futures and exchange-traded funds.
Crypto gold, on the other hand, is a digital currency that miners create more of electronically. Crypto miners verify transactions and group them into blocks. This then forms the cryptocurrency’s blockchain.
Whenever miners complete a block, they create new crypto coins that people can use for online transactions or investments. In crypto trading, crypto gold is often backed by physical gold via Allocated Bullion Exchange.
Both types of gold can be satisfying to own. Gold-backed cryptocurrencies, however, are different from other cryptocurrencies. Standard cryptocurrencies that are prone to speculative investment risks.
If you’re thinking of investing in gold, compare physical gold and crypto gold to make an informed decision.
How to easily spend your crypto gold
One popular cash alternative is the debit card. It’s handy for daily purchases. Kinesis introduces a unique approach to making payments with the Kinesis Debit Card.
This card uses digital tokens for transactions and you can use it at the grocers or grabbing a coffee at a coffee shop.
The Kinesis Debit Card lets our customers spend their gold or silver-backed cryptocurrencies. You can use it at any retailer or vendor that accepts Mastercard or Visa. Here’s what you’ll get from investing in gold with Kinesis and using this card:
Instant conversion of KAU and KAG to fiat
You can convert your KAU and KAG into cash instantly and use it anywhere. Kinesis transactions only take two to three seconds, like standard debit cards.
Add and spend multiple cryptocurrencies from your eWallet
The payment process using the Kinesis Debit Card is dynamic. It creates a connection between the card and mobile eWallet which stores your crypto coins.
Fast and secure transactions with minimal fees
The Kinesis Debit card costs only $1.00 per transaction. Transferring money from your eWallet to another is free. Transfers from Kinesis to mobile eWallet or the debit card cost 1% of the transaction amount.
The Kinesis Financial Network (KFN) works as a mobile banking system, connecting to the Mastercard and Visa network. That means that you can use gold and silver to pay for everyday transactions.
Using eWallet for the Kinesis Velocity Token
With your eWallet ready, you can buy Kinesis Velocity Token (KVT) using Ether or cash. If you choose cash, a Fiat Transfer will follow delivering your KVT into your eWallet.
Remember, don’t use a cryptocurrency exchange address or eWallet to get Kinesis KVT. As we mentioned earlier, they often don’t support ERC20 tokens, and KVT needs an ERC20-compatible eWallet.
Kinesis will only release 300,000 tokens so make sure you buy them while they’re still available. Experience gold standard digital currency without crypto security and short-term volatility issues.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.