According to Arcane Research, the market cap of gold-backed crypto tokens has increased 60% to more than $1 billion by 2022. in his latest weekly report†
Gold Shines, Bitcoin Disappoints
In 2022, investors rushed to the perceived safety of gold-backed crypto assets, whose value is tied to the price of gold.
Namely, PAX Gold (PAXG), Tether Gold (XAUT) and similar precious metal digital assets have risen in value as investors “diversify inflation betting” within the crypto sector, Arcane Research explains. PAXG is also outperforming Bitcoin (BTC) this year, as can be seen in the chart below.
XAU/USD vs BTC/USD daily price chart. Source: TradingView
Gold itself was up nearly 14% YTD to nearly $2,050 an ounce, its highest level since August 2020. Arcane noted:
“The rising gold price seems to have attracted more crypto investors to the gold-backed tokens […] as they allow crypto investors to diversify inflation betting through the well-known crypto market infrastructure.”
PAXG outperforms XAUT
PAX Gold contributed the most – about $500 million – while the market value of the gold tokens rose to more than $1 billion. By comparison, its biggest rival, Tether Gold, witnessed minimal growth, Arcane noted while quoting the chart below.
Market capitalization of gold-backed tokens. Source: CoinGecko, Arcane Research
Currently, the total market cap of PAX Gold is just over $607 million, up 85% YTD. Similarly, Tether Gold’s market value rose to nearly $211 million, up just 9.20% over the same period.
Intelligent money behind the rally with gold coins
Alexander Tkachenko, founder and CEO of VNX – a Luxembourg-based, FMA-regulated tokenized gold investment platform, explains that intelligent investors have been more cautious when investing in cryptocurrencies. He adds that their decision to invest in gold-backed tokens reflects their propensity to use regulated digital assets amid lingering macro uncertainty.
Not all gold-backed tokens are good value. Therefore, investors should be careful not to get a ‘paper index’, but should look for tokens that are linked to physical gold and are ‘safe’ – issued by regulated issuers and that can demonstrate the gold reserves.
Related: Bitcoin Curbs Losses After US Bans Russian Oil, Gold Hits Record Highs
The issuer of PAXG is Paxos, a New York State chartered trust company regulated by the New York State Department of Financial Services (NYDFS). That translates to less overhead risk, especially when it is confirmed that every PAXG in circulation is 100% backed by an ounce of gold.
However, XAUT does not appear to be regulated by any regulatory body in any jurisdiction inside or outside the US. states that “no regulatory body has examined or approved” his claims that they are backed by gold.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Coin-Crypto.com. Every investment and trading move involves risks, you should do your own research when making a decision.