- PAX Gold’s (PAXG-USD) PAXG crypto is generating social media interest in the wake of the week’s stablecoin news
- PAXG is a gold-backed cryptocurrency
- Users wonder if PAXG might be a safer store of value than stablecoins like TerraUSD (UST-USD) and Tether (USDT-USD)
When the market gets whipped into a frenzy, stablecoins have always been a point of refuge for investors. But what if it’s the stablecoins that are failing? Where might a more risk-averse investor go? Well, it seems that today, investors are looking into gold-backed cryptos with curiosity. Could these tokens be the real stable cryptocurrencies? One token in particular, PAX Gold, is drawing attention.
This week is showing that stablecoins aren’t a foolproof way to escape crypto volatility. TerraUSD, the stablecoin of the Terra network, is crashing and burning, falling from its $1 peg to just 15 cents. Of course, being a stablecoin, this is unprecedented. The name suggests that these tokens should always remain stable in price.
Well, it turns out that UST’s algorithmic model isn’t 100% effective. The price de-pegged from $1 over the weekend, after DeFi activity took a steep decline and users flowed out of the token. The flight of users was enough to overwhelm the algorithm, which constantly adjusts the UST supply to keep it in equilibrium with demand.
The algorithmic stablecoin model is one that’s oft-criticized; most stablecoins are kept to their peg with reserves of fiat currencies that back the tokens on a 1:1 basis. Algorithmic tokens don’t have such reserves. However, UST isn’t the only stablecoin to drop this week. Reserve-backed stablecoin Tether also de-pegged during the week, showing that these types of stablecoins aren’t bulletproof, either.
PAXG Crypto: Could Gold-Backed Tokens Be the Best Stablecoins?
UST’s crash over the past week, and Tether’s own de-pegging, are shaking up stablecoin investors. Now, stable cryptos don’t seem quite as stable as they did before. But what if there is an alternative option? Luckily there is in gold-backed tokens like the PAXG crypto, and investors seem to be exploring the strengths of these blockchain players.
Paxos is a network focusing on stable assets. It’s most notable for its own dollar-backed stablecoin offering, the Pax Dollar (USDP-USD). However, it’s Paxos Gold that investors seem to be after today.
Launched in 2019, PAXG is a gold-backed crypto that operates in a way similar to a reserve stablecoin. Each PAXG token is matched 1:1 with an ounce of pure gold, which Paxos claims to keep in Brink’s vaults. By buying the PAXG crypto, investors can gain exposure to gold without having to actually own the physical metal.
Since it follows gold prices rather than the dollar, PAXG crypto does fluctuate in price. But, unlike other cryptocurrencies, the gold-backed token is rising and falling in accordance with one of the oldest and most well-established stores of value in the world.
Investors are starting to take a greater interest in these gold-backed assets today on Twitter. As DeFi protocol GoldMint points out, PAXG is one of the currencies least affected by this week’s market volatility. Crypto data aggregator LunarCrush ranked PAXG among its top 10 cryptos this week. Other altcoins are even buying PAXG to underlie their own projects.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.