PAX Gold, which outperformed Tether Gold, did the bulk of the heavy work in driving the gold token market worth past the $1 billion level.
According to Arcane Research’s latest weekly analysis, the market valuation of gold-backed crypto tokens surged by 60% in 2022, surpassing $1 billion for the first time in history.
Bitcoin disappoints, while gold thrives.
In 2022, investors are flocking to the perceived safety of gold-backed crypto currencies, whose value is tied to gold’s price.
According to Arcane Research, PAX Gold (PAXG), Tether Gold (XAUT), and other precious metal-backed digital currencies have been increasing in value as investors “diversify inflation bets” across the crypto sector. As demonstrated in the figure below, PAXG has outperformed Bitcoin (BTC) this year.
Gold has risen over 14% year-to-date to nearly $2,050 per ounce, the highest level since August 2020. “The rising gold price appears to have attracted more crypto investors to gold-backed tokens since they allow crypto investors to diversify inflation bets through familiar crypto market architecture,” Arcane explained.
XAUT is outperformed by PAXG.
PAX Gold made the largest contribution — roughly $500 million — boosting the gold tokens’ market cap to over $1 billion. Tether Gold, on the other hand, has seen limited growth, according to Arcane, who cited the chart below.
PAX Gold’s entire market worth is at just over $607 million, up 85 percent year to date. Tether Gold’s market capitalization increased to roughly $211 million in the same time span, an increase of only 9.20 percent.
The gold-token boom is being fueled by smart money.
Intelligent investors have been more careful when investing in cryptocurrencies, according to Alexander Tkachenko, founder and CEO of VNX, a Luxembourg-based, FMA-regulated tokenized gold investment platform. He goes on to say that their decision to invest in gold-backed tokens demonstrates their desire to use regulated digital assets in the face of continuous macroeconomic uncertainties.
Tkachenko stated that not all gold-backed tokens are valuable. As a result, investors should avoid buying a “paper index” and instead look for tokens that are connected to genuine gold and are “safe” – meaning they are produced by licenced issuers and can show gold holdings.
Paxos, a New York State-chartered trust firm regulated by the New York State Department of Financial Services, is the issuer of PAXG (NYDFS). This means lower overhead risks, especially when it comes to validating that each PAXG in circulation is 100% backed by an ounce of gold.
XAUT, on the other hand, does not appear to have been regulated by any regulator in the United States or elsewhere. It also says in its whitepaper that “no regulatory authority has evaluated or authorised” its gold-backed claims.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.