Outspoken analyst Martin Chuddbroker has warned his wealthy clients to stay away from what he calls a new wave of Ponzi schemes
CEO at Chuddbroker Analytica, Martin has spoken out against the recent explosion in new “gold” crypto tokens.
In a recent report published for the benefit of his wealthy subscribers Chuddbroker slammed the profusion of gold-backed tokens coming to market.
Martin described many of these new gold-backed tokens as “thinly veiled Ponzi schemes where tokens are minted from thin air in a way that couldn’t be further removed from true investment in gold” with his scathing attack sending shockwaves through both the gold and crypto investment communities.
He continued “Many of these so-called investments are effectively cash-grabs where the token supplier will keep 20-50% of the supply of tokens, meaning they will also own 20-50% of the later purchased gold, gold that naive investors think, rightfully, belongs to them!”
And while Chuddbroker is true to form as one of crypto’s biggest haters – the points he raises are good ones.
Similar to traded gold ETFs and other gold derivatives there are many gold tokens which may be only partially backed by physical metals while other supposedly gold tokens have no precious metals backing them at all.
There isn’t any inherent value in a token simply because part of it’s function is in tracking the price of gold. And while it’s an undeniable truth that some tokens have made investors significant profits recently, the vast majority of new tokens on the market will never see any rises and could instead leave investors with worthless assets.
Chuddbroker signed off his report with a clear piece of advice, “If you want to buy gold, buy gold. These digital gold tokens add several layers of completely unnecessary risk to what is typically a sound investment and for no greater upside. Buyer beware!”
Is Martin right? Well it wouldn’t be the first time the market has experienced fraud or large losses in the crypto space, with the gold-backed crypto market being especially at risk due to the trust many investors place in precious metals like gold.
As with any investment it;s essential that you do at the very least some basic research before buying a new token at it’s initial offering. Look into the company behind the launch, look at people who are running it and those who are promoting it and ask yourself if you’d still invest if there was no hype surrounding the ICO.
Remember ALL digital tokens are a high risk with most (other than “stablecoins”) being subject to significant price movement on a daily basis.
Unless you can afford to lose your entire investment it may be best if you take a hard pass – after all some failed tokens have literally lost all of their value dropping to zero.
For those of you who really do want to invest in gold without holding the physical item then there are better, safer and more established routes open to you.
For many we’d recommend holding physical gold in an IRA, held at a trusted depository. You get the benefits of an IRA’s tax-advantaged status and knowledge that the asset has never in all of human history been worthless.
Alternatively, gold derivatives such as ETFs are always popular choices even if as we’ve already mentioned some have little or no actual gold backing them.
At the end of the day it’s a choice between safety and stability versus high risk with potential for life-changing gains.
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