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  • By The Financial District

Crypto Backed By Gold Batters Bigger Market

A fledgling class of crypto that feasts on risk is outshining a wider market paralyzed by war and inflation, Lisa Pauline Mattackal and Medha Singh reported for Reuters.


Photo Insert: Tether Gold has leaped 8.5% while bitcoin, by contrast, has lost over 13% and ether is down 20%.



Coins backed by gold are newer variants of "stablecoins," which are typically pegged to the dollar to tame volatility. The largest, Pax Gold or PAXG, has jumped 7.4% in 2022, while main rival Tether Gold has leapt 8.5%. By contrast, bitcoin has lost over 13% and ether is down 20%.


"One of the main concerns that a lot of people who are new to crypto have is that it's not backed by anything. It just gets on a screen," said Everett Millman, chief market analyst at Gainesville Coins. "So attaching them or linking them to a real-world commodity, it does make some sense."



The reach for gold, a traditional hedge against geopolitical upheaval and inflation, is unsurprising. The demand for gold-backed cryptocurrencies, though, is new.


Stablecoins, a fast-growing breed of crypto, have emerged as a common medium of exchange, often used by traders seeking to move funds around. It is easier to swap major stablecoins for bitcoin or other crypto, for example, than it is to swap traditional money like US dollars for bitcoin.


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Tether Gold has been buoyed by bigger investors, including "whales" with $1 million or more of cryptocurrency, using the token to change a portion of their holdings into gold, according to Paolo Ardoino, Tether's chief technology officer.


"Many of our investors were already involved in crypto, but were interested in not having their entire wealth in cryptos or in dollars, and were seeking more inflation-resistant assets like gold," he said.


Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

Yet gold-backed coins are still a niche novelty in the crypto market at present - PAXG and Tether Gold are barely over two years old - with thin liquidity and little certainty about their long-term fortunes.


PAXG has seen its market value almost double to $627 million this year, while Tether Gold has risen 9% to above $209 million. By comparison the latter's eight-year-old sibling, dollar-pegged Tether - the world's largest stablecoin - has a market cap of over $83 billion.



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