A fledgling class of crypto that thrives on risk is outshining a larger market paralyzed by war and inflation. Gold coins are newer variants of “stablecoins,” which are typically pegged to the dollar to reduce volatility. The largest, Pax Gold (PAXG), has risen 7.4 percent in 2022, while main rival Tether Gold has risen 8.5 percent.
In comparison, bitcoin is down more than 13%, and ether is down 20%.
“One of the main concerns that many newcomers to cryptocurrency have is that it is not backed by anything. It simply appears on a screen “Gainesville Coins’ chief market analyst, Everett Millman, agreed. “So attaching or connecting them to a real-world commodity makes some sense.”
It is unsurprising that gold, a traditional hedge against geopolitical upheaval and inflation, is being sought after. The demand for gold-backed cryptocurrencies, on the other hand, is relatively new.
Stablecoins, a rapidly growing type of cryptocurrency, has emerged as a popular medium of exchange, frequently used by traders looking to move funds around. It is easier to exchange major stablecoins for bitcoin or other cryptos than it is to exchange traditional money such as US dollars for bitcoin.
According to Paolo Ardoino, Tether’s chief technology officer, Tether Gold has been boosted by larger investors, including “whales” with $1 million or more of cryptocurrency, who use the token to convert a portion of their holdings into gold.
“Many of our investors were already involved in crypto, but they were interested in not having their entire wealth in cryptos or dollars and were looking for more inflation-resistant assets like gold,” he said.
However, gold-backed coins are still a novelty in the crypto market at the moment, with thin liquidity and little certainty about their long-term fortunes – PAXG and Tether Gold are only a few years old.
PAXG’s market value has nearly doubled to $627 million this year, while Tether Gold has increased by 9 percent to more than $209 million. In comparison, the market cap of the latter’s eight-year-old sibling, dollar-pegged Tether – the world’s largest stablecoin – is over $83 billion.
According to CoinMarketCap data, daily PAX gold trading volumes ranged from $10 million to $520 million over the last month, while ether volumes fluctuated between $8.7 billion and $25 billion. The 24-hour volume of dollar-pegged tether ranged between $35 billion and $92 billion.
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