Shiny crypto assets: A systemic look at gold-backed cryptocurrencies during the COVID-19 pandemic

In this paper, we empirically analyse the performance of five gold-backed stablecoins during the COVID-19 pandemic and compare them to gold, Bitcoin and Tether. In the digital assets' ecosystem, gold-backed crypto-currencies have the potential to address regulatory and policy concerns by decreasing volatility of crypto-currency prices and facilitating broader cryptocurrency adoption. We find that during the COVID-19 pandemic, gold-backed cryptocurrencies were susceptible to volatility transmitted from gold markets. Our results indicate that for the selected gold-backed cryptocurrencies, their volatility, and as a consequence, risks associated with volatility, remained comparable to the Bitcoin. In addition, gold-backed cryptocurrencies did not show safe-haven potential comparable to their underlying precious metal, gold.

Automated summary

The study found that during the COVID-19 pandemic, gold-backed cryptocurrencies were susceptible to volatility transmitted from gold markets, with comparable volatility and risks to Bitcoin but without exhibiting the same safe-haven potential as gold.