Crypto-gold contract PAXG outperforms Bitcoin (BTC) again in recent market bloodbath. Since the collapse began on June 7th, PAXG has shown an amazing market performance with a 50% surge against BTC at one point. Later, when the situation cooled down, its listings dropped by 7% and its price now remains at the 0.08076 level against BTC or $1,819 in dollar equivalent.
Source: TradingView
It is worth remembering that PAXG, issued by Paxos, is a token backed by real gold at a ratio of 1:1. Its tie to gold makes it a kind of tool that allows crypto investors to tap into gold without leaving the cryptocurrency market ecosystem.
Is Gold or Its Crypto Analog a Defensive Asset During a Crisis?
At all times, financial markets have been dominated by the belief that gold is the asset best suited to protect funds from at least inflation and at most serious economic shocks. However, this is not entirely correct – at least as far as the last point is concerned.
Yes, when it comes to geopolitical shocks or inflation, gold is a protective asset as the agents’ economic situation does not change and they reallocate funds in favor of a “safe haven”. If we talk about the situation of the collapse of the markets, then this is associated with a decrease in investor income and, accordingly, a decrease in demand for precious metals.
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Of course, at first glance, PAXG’s rise over Bitcoin is impressive. However, on the PAXG to USDT chart, the picture is no longer looking so pretty. Since the beginning of the same period in question, the price per token initially increased by 3% from $1,836 to $1,896, but then promptly fell by 3.69% to $1,819, which is even below the June 7 price.
Source: TradingView
Is Gold or Its Crypto Analog a Defensive Asset During a Crisis? The question is a creative one. The benefits of diversifying by adding gold to your portfolio are obvious as the precious metal or its crypto counterpart has no direct correlation with business cycles. However, lack of correlation and negative correlation are very different things.
Gold, and PAXG in particular, is no less volatile than BTC or ETH and can certainly lose value. One must therefore be careful when formulating a “protected good” and clearly distinguish between which processes gold protects and which “safe haven” moments in gold are perhaps not worth looking for.
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