Affected by the various geopolitical and financial market developments, traders have increasingly started turning to digital tokens backed by gold, leading to their unprecedented growth in 2022.
The market capitalization of tokens backed by gold, a precious metal that has traditionally been used to fend off inflation, stood at $1 billion on March 7, according to the data from Arcane Research.
This represents a 60% growth of these rare cryptocurrencies, primarily PAX Gold (PAXG) and Tether Gold (XAUT). These are the two topmost gold stablecoins, as they’re often called, due to their price being closely linked with that of gold.
Specifically, every PAXG and XAUT token is equal to one troy fine ounce of gold.
Reasons behind heightened interest
This gold stablecoin market cap increase is pushed by the growing price of the yellow metal, making strides under the uncertainties escalated by the recent geopolitical developments.
Finbold earlier reported that nearly $1 trillion had been infused into gold, as the price of the precious metal reached a 13-month high on February 24.
Indeed, the acceleration of geopolitical tension and high inflation in the wake of the Russian invasion of Ukraine has led to the increased demand for gold-backed tokens.
The prospect of such cryptocurrencies facilitating diversification of inflation bets through familiar crypto market infrastructure seems to have been enough to entice crypto investors to focus their gaze on them.
At press time, the market cap of PAX Gold was $609.22 million, a 47.4% increase compared to $320.45 three months before. Meanwhile, the market cap of Tether Gold was $211.39 million, as opposed to $188.09 three months prior – an increase of 11%, as per CoinMarketCap data.
Finally, the price of gold at press time was $2,012 per ounce, with an estimated market capitalization of $12.78 trillion, according to data from CompaniesMarketCap.