Tokenized gold tops $1 billion market cap amid banking crisis concerns

The total market capitalization for tokenized gold has again topped $1 billion. It currently stands at $1.02 billion after rising another 2.4% over the past 24 hours — during which time the trading volume for tokenized gold surpassed $25.5 million.

It’s a tight race for the title of top tokenized gold asset. The market capitalization for PAX Gold is currently almost $523 million, while Tether Gold’s is nearly $499 million. The next closest competitor, according to CoinGecko, is Perth Mint Gold Token, which has a significantly smaller market cap of $2.46 million — essentially rendering this niche of the market a two-horse race.

Both PAX Gold and Tether Gold have seen 24-hour market price increases of over $2,000 — in line with the price of the underlying asset, gold. The former token has increased by 2.7% and carries a slight premium, while Tether’s offering has increased by 1.9%.

The market-cap milestone for tokenized gold crypto assets comes as the price of gold jumped to a 13-month high — topping $2,025. (Industrial metals, conversely, are sliding.)

What is tokenized gold?

PAX Gold and Tether Gold, as the names imply, are tokens pegged to the price of gold. Because they utilize the same distributed ledger technology as Ethereum, they offer investors and traders the ability to easily self-custody and trade on centralized exchanges.

PAX Gold is issued by New York-based fintech firm Paxos Trust Company. Tether Gold, as the name implies, is issued by Tether — which also issues the dominant USD-pegged stablecoin, USDT.

Kraken and Binance are the top markets for PAX Gold among major centralized exchanges, while Bitfinex dominates the Tether Gold market.

Decentralized exchange Uniswap also technically offers trading for the tokens, but with significantly less liquidity.

Safe haven assets in a western banking crisis

Though the “big-even” number of $1 billion seems significant, this isn’t the first time tokenized gold tokens have hit this milestone. In fact, it spent much of 2022 well above the $1 billion market — though it fell through in August 2022 and didn’t return until last month.

“$1 billion is still relatively little,” explained The Block’s CEO Larry Cermak, adding: “The likeliest reason is that some crypto whales prefer to hedge their crypto exposure with gold, and use these tokens instead of storing gold bars in their safes.”

Indeed, concerns over a potential western banking crisis have seen investors flock to gold as a safe-haven asset. These concerns may also be benefiting bitcoin — which is often considered to be the gold-standard of the crypto market, if not itself akin to “digital gold.”

“The simplicity of crypto as digital bearer assets solves for the immediate counter-party risks that bank customers are dealing with, but customers also require stability of value,” Bernstein’s Gautam Chhugani said.

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