- PAX Gold’s (PAXG-USD) PAXG crypto sparks social media interest following stablecoin news of the week
- PAXG is a gold-backed cryptocurrency
- Users wonder if PAXG could be a safer store of value than stablecoins like TerraUSD (UST-USD) and Attached (USDT-USD)
When the market gets frenetic, stablecoins have always been a safe haven for investors. But what if it is the stablecoins that fail? Where could a more risk averse investor go? Well, it seems that today investors are looking curiously at gold-backed cryptos. Could these tokens be the real stable cryptocurrencies? One token in particular, PAX Gold, is attracting attention.
This week shows that stablecoins are not a surefire way to escape crypto volatility. TerraUSD, the Terra Network stablecoin, is collapsing and burning, dropping 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% efficient. The price rose from $1 over the weekend, after DeFi activity declined sharply and users left the token. The user drain was enough to overwhelm the algorithm, which constantly adjusts the UST supply to keep it in balance with demand.
The algorithmic model of stablecoin is one that is often criticized; most stablecoins are kept at their bedside with reserves of fiat currencies that back the tokens on a 1:1 basis. Algorithmic tokens have no such reserves. However, UST is not the only stablecoin to fall this week. The Tether-backed stablecoin also broke loose during the week, showing that these types of stablecoins aren’t bulletproof either.
PAXG Crypto: Could Gold-Backed Tokens Be the Best Stablecoins?
The crash of UST over the past week and Tether’s own unpecking are rattling stablecoin investors. Now, stablecoins don’t seem as stable as before. But what if there is an alternative option? Fortunately, there are gold-backed tokens like the PAXG crypto, and investors seem to be exploring the strengths of these blockchain players.
Paxos is a network focused on stable assets. It is most notable for its own offering of dollar-backed stablecoins, the Pax Dollar (USDP-USD). However, it is Paxos Gold that investors seem to be looking for today.
Launched in 2019, PAXG is a gold-backed crypto that functions similarly to a reserve stablecoin. Each PAXG token is paired 1:1 with one ounce of pure gold, which Paxos claims to hold Brink’s coffers. By buying the PAXG crypto, investors can gain exposure to gold without having to own the physical metal.
Since it tracks gold prices rather than the dollar, the price of the PAXG crypto fluctuates. But, unlike other cryptocurrencies, the gold-backed token rises and falls in accordance with one of the oldest and most established stores of value in the world.
Investors are starting to take more interest in these gold-backed assets today on Twitter. As DeFi protocol Gold Mint pointed out, PAXG is one of the currencies least affected by market volatility this week. Cryptographic data aggregator Lunar Crush ranked PAXG among its top 10 cryptos this week. Other altcoins are even buy PAXG to support their own projects.
As of the date of publication, Brenden Rearick had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.