Gold Tokens Take Off as Inflation Accelerates, Bitcoin Retreats

Friday 11 June 2021, 7:18 AM AEST - 1 week ago

As bitcoin loses some of its luster as digital gold, some cryptocurrency investors are apparently seeing value in tokens backed by the physical version of the yellow metal.

According to data compiled by Arcane Research, the total market capitalization of gold-backed tokens has grown 30-fold since the start of 2020, reflecting a surge in demand.

Market capitalization of gold-backed cryptocurrencies.

In particular, pax gold (PAXG), a token launched in September 2019 by the New York-based stablecoin issuer Paxos under the Ethereum blockchains ERC-20 standard, has seen steep growth in recent months. Its market capitalization has surpassed that of tether gold (XAUT), another gold-backed cryptocurrency from Tether, the dominant stablecoin issuer.

Tether gold made its debut in January 2020, and the two gold-backed stablecoins were in a close race until May – around the time when pax gold was listed on India-based exchange Wazirx, which is a unit of the giant cryptocurrency exchange Binance.

India is home to the worlds largest retail gold, Arcane Research said. This could be the major explanation for the growing demand for pax gold.

But according to Carl Vogel, senior product manager at Paxos, the recent success of pax gold is due to rising demand from investors and traders looking to hedge risks from both rising inflation and the highly volatile crypto market.

The Bureau of Labor Statistics reported Thursday that consumer prices in the U.S. rose about 5% in the 12 months through May, the fastest pace since August 2008, as the economy reopens from coronavirus-related restrictions, and as stimulus money continues to make its way into consumer purchases and financial markets.

Many investors have put money into bitcoin over the past year on the belief that it could serve as an inflation hedge, a type of dig ...

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