PAX Gold Market Cap Up 50%
Gold has always been a safe haven asset. When markets and geopolitical situations are unpredictable, investors flock to gold to minimize risk. Gold is a global asset independent from any fiat currency or government, it is a universally attractive store of value and it is timeless. And with gold-backed digital assets (like PAX Gold), it is now easier and faster than ever to get physical investment-grade gold.
Investment products like derivatives, ETFs and futures contracts give investors exposure to the price of gold, but not ownership of the underlying asset. Instead, investors own a financial contract representing entitlement to a specific percentage of pooled gold which may not always fully back the investments made. These products can be attractive to institutions and individuals for various reasons, but do not substitute for full ownership of investment grade gold as a store of value in times of volatility, uncertainty or crisis. If you want to get the gold quickly and easily, these investment options will be frustrating and seem insufficient.
That begs the question – how can you get physical, investment-grade gold quickly and easily? The answer to that question is complicated by the length of time it takes to settle physical gold purchases. For the institutional gold buyer, it can take days from time of purchase to settlement. A lot can change in a volatile environment over the course of a few days, which only ratchets up risk. If you’re an everyday investor, your only option for getting real gold quickly is through small retail outposts. This option is not ideal as gold is heavy (making it difficult to transport or hold large amounts), vault storage is costly, provenance can be hard to evaluate (Can you be sure this gold is 99.9% fine?) and finding points of purchase can be challenging.
As of late, geopolitical events have driven up the price of physical gold. Since February 1, 2022, the gold price has increased more than 5% from $1797 to $1903. This is a significant increase in a short period of time. It demonstrates significant demand for the asset amid uncertainty.
At Paxos, we’ve seen a significant uptick in the number of individual and institutional holders of PAX Gold, our digital, investment-grade gold backed token. In less than a month, the market cap of the token increased nearly 50% from $355 million to $530 million. We’ve seen similar dynamics to this before (think March 2020 with the emergence of COVID-19), but we’re now seeing a new dynamic play out. Global political tensions are evolving so quickly that investors need and want their gold in hand ASAP. It also needs to be easy to buy with low barriers. The desire to own physical gold instantaneously upon order execution – a promise that can only be realized through a digital asset due to blockchain technology – is driving the purchasing patterns of PAX Gold. And notably, more than 15,000 individual wallets hold PAX Gold, whereas there are only 400 wallets holding our closest competitor.
Bottom line: The gold market is established and it’s an asset that has existed since the dawn of time. But the need and desire to own gold is not going anywhere – it’s only increasing. What is changing, however, is the need to get gold quickly and easily. That’s where digital, gold-backed tokens can solve a fundamental problem for an established market. If you’re interested in learning more, check out our website.
Disclaimer: Paxos is not an investment advisor and this is not investment advice.