This week’s crypto market collapse has been devastating, especially to investors on the losing end. Unfortunately, this is not the only red period for a market that survives on extreme price volatility. The recent collapse has seen the prices of top assets like BTC, ETH, ADA, XRP, etc., plummet beyond human comprehension. Terra’s LUNA has been the most disappointing, as it lost more than 90% value in a single day this week. In general, the crypto market is bleeding, and the need for a savior is crucial at this time. Surprisingly, there are speculations that an asset – Pax Gold, backed by gold, moves in an inverse correlation with cryptocurrencies. Firstly, it is important to understand what the gold-backed asset entails and why crypto analysts advise investors to buy it.
What Is PAX Gold (PAXG)?
Founded in 2019 by Paxos, Paxos Gold (PAXG) is a crypto asset backed by real gold reserves held by its developers. Co-founded by Charles Cascarilla and Rich Teo, Paxos is a startup specializing in building infrastructure for cryptocurrency exchange. Each PAXG is redeemable for one troy fine ounce of gold, and its market value also mirrors the physical gold price. According to Paxos, the ERC-20 token is on the Ethereum Blockchain and is exchangeable for other cryptocurrencies. Since it represents physical gold, its value is tied directly to the market value of the traditional asset.
Paxos executes monthly audits to maintain its reserves to ascertain that its PAXG supply matches its gold portfolio. PAXG token holders possess legal ownership rights to a part of the gold held by the Paxos Trust Company. This is why PAXG holders benefit from physical ownership of gold bars and owning cryptocurrencies. The gold-backed token derives its value from allowing crypto investors to get exposure to an asset dependent on gold’s price. Lastly, this investor also enjoys the unique advantages of cryptocurrencies like an easy online exchange, portability, and exchangeability.
How PAX Gold (PAXG) Works
PAXG runs on the Ethereum blockchain, secured by the proof-of-work (PoW) consensus mechanism. This is why it transacts per Ethereum’s smart contract rules. It is tradeable on many crypto exchanges, allowing crypto investors to start investing in gold. It also utilizes similar consensus protocol and features as Ethereum, including access to smart contracts. Alternatively, Paxos uses a third-party trusted analytical tool to checkmate fraud and discrepancies.
The project developers also rely on frequent smart contract audits to identify bugs and expose anomalies in the project. In order to generate income, Paxos charges 0.02% of the transaction fee to create and destroy PAXG tokens. The tokens are secured via cryptographic keys checked using their Ethereum wallet address in the PAXG lookup tool. They are also divisible, and globally, smaller gold portions are redeemable via physical gold retailers. PAXG is available for purchase on many exchanges, including Binance, Kraken, BitZ, and FTX.
Features of PAX Gold
Listed below are the distinct features of PAX Gold, which make it different from your regular cryptocurrency and traditional gold asset;
Availability
The ERC-20 token on Ethereum is highly available, moveable, and tradeable from anywhere globally. Like the regular gold market, there is no limit to how much one can purchase to become a token holder. Owning minimum quantities enables investors to own a part of an LBMA-accredited gold bar under London Good Delivery protocols.
Highly-Backed
The project founders, Paxos, are regulated by the New York State Department of Financial Services (NYDFS). This is because they are a trust and custodian organization that should ensure investors are comfortable in their dealing. Alternatively, PAXG is also backed by allocated gold held in one of the most secure vaults in the world. To further build trust, a top-notch auditor ensures a matching supply of PAX Gold and underlying gold monthly.
Cross-Border
PAXG holders can also convert PAXG to fiat money, physical or unallocated gold via the Paxos platform. Fortunately, an exciting feature of the ERC-20 token is that its uses cut across compatible exchanges. PAXG holders can also trade it for other cryptocurrencies on crypto exchanges like Binance, Kraken, etc.
Redeemable
PAXG remains the only gold token redeemable for LBMA-accredited Good Delivery gold bullion bars. PAXG holders, via a network of physical gold retailers, can also redeem smaller portions of the tokens. There are also many options for token holders to redeem their gold via local and international options.
Cheap
Paxos is cheap to use, as it offers users a highly competitive fee structure-based. To create and redeem the PAXG token in their wallet, users pay between 0.02-1% of volume tiers in fees. Paxos also offer low on-chain Ethereum gas fees of 0.02%, with zero storage fees. Generally, token holders trade the gold-backed token on Ethereum at a very cheap rate.
Why Choose PAXG?
Pax Gold is a stablecoin backed by physical gold that features several advantages belonging to cryptocurrencies. Unlike typical cryptocurrencies, its price is controlled by the actions of gold and its market. However, an edge of the token is that its developers have a track record for successfully implementing stablecoins. Examples include Paxos Standard (PAX) and Huobi stablecoin (HUSD). Paxos is also fully collateralized, as equal amounts of PAXG are backed by a proportionate amount of gold in their vault. PAXG holders can own a minimum amount of tokens, earning interest on them via crypto-asset interest accounts. This is a huge advantage, as owning and investing in gold can be capital intensive and expensive. Crypto.com and Nexo offer user interest accounts, with the latter offering PAXG-backed loans to users.
Limitations Of PAXG
While PAXG allows users to buy and sell partial or infinitesimally small amounts of gold, the token still has limitations. Firstly, it can only be bought by verified users and does not harbor anonymity. Typically, people who buy cryptocurrencies may not like their details to be out there and do so mainly in secrecy. However, to buy PAXG, users will need to fulfill a proper KYC check, which may be a tad invasive. Alternatively, In compliance with regulatory responsibilities, the issuer may need to adhere to legal requirements. This requirement may include freezing, unfreezing, or wiping users’ account information. Unfortunately, since PAXG is decentralized, It won’t be easy to comply fully with legal requirements on transactions.
How To Buy PAXG On Coinbase
Like cryptocurrencies, there exist abundant options for purchasing PAXG. Users can buy the token on the Paxos user interface with USD or unallocated gold. The process is usually straightforward for novices after including a valid payment option on Paxos. Alternatively, users can also buy PAXG on Coinbase by following the steps below;
Step 1 – Sign Up
As a user, you will need to log in or sign up on Coinbase. Using your email address or phone number, you can do that on the Coinbase App or Website. The Coinbase app is available for download on Android and iOs stores, compatible with the respective devices. The signing-up process is usually seamless and complete after supplying a few KYC details. To complete it, you will need to verify the information you have provided. However, existing users will only need to log in to their accounts.
Step 2 – Fund Your Account
After logging in, it is essential to fund your Coinbase account. This will enable you to complete the purchase of PAXG smoothly. Funding your account is stress-free and could be done via a bank transfer, a debit, or credit card. Coinbase also allows users to fund their accounts via peer-to-peer trading in some jurisdictions. Alternatively, users can also take advantage of the numerous third-party payment options available on Coinbase.
Step 3 – Purchase PAXG
You will now use the funded account to purchase Ethereum on Coinbase. Buying Ethereum on Coinbase is simple and is quickly completed with your funded account. However, it is important to always leave some extra cash for gas fees. Lastly, now that you have your Ethereum, you will use it to purchase PAXG in the trade tab. Go to the market tab and search for PAXG. Fill in the amount you want, pay the gas fees, and it will automatically reflect in your account.
Buy PAXG To Make Profits In The Market Crash
The crypto market is in turmoil today, as top assets continue to collapse in a tough week for the market. However, investors run to stablecoin to ensure that their investments don’t fall beyond reach when this happens. Unfortunately, the recent collapse has seen stablecoins like USDT and USDC take a fall beyond the price of the USD backing them. However, that fall makes investors lose interest in stablecoins, as they don’t seem to be as stable as before. Fortunately, investors are now tending towards gold-backed stablecoins like PAXG, whose value is dependent on gold’s performance. This is because, unlike other stablecoins, PAXG made a slight surge this week.
The token’s performance was commendable, generating surging interest on Twitter amongst crypto enthusiasts. However, the question today is, in the future, are stablecoin investors considering PAXG as an alternative investment?. It is essential to look into some activities this week to answer the question. DeFi protocol GoldMint reports that PAXG is one of the currencies free from this week’s market volatility. That assertion is true as the token only fell by 5% in price value this week. Crypto data aggregator LunarCrush ranked PAXG among its top 10 cryptos this week, as only a few assets were more stable. However, only the future will tell the importance of PAXG to stablecoins investors amidst surging interest.
The Future Of PAXG
PAXG has a circulating supply of 328,824 coins and an uncapped maximum supply. These figures will increase in the future as Paxo doubles up its available gold supply backing. Alternatively, PAXG remains the safest way to own gold and cryptocurrency. Despite rising interests in the token this week, its 24hour trading volume fell short by 53% and hangs around $35,190,856.10. However, its market cap is still around $600 million, a relatively low figure. Surprisingly, many analysts perceive gold as a stable asset and a hedge against price volatility typical of cryptocurrencies. However, the gold-backing nature of PAXG qualifies it as a more stable asset worthy of investing than cryptocurrencies. This perception should see investors who fancy low-risk assets like gold and high-risk commodities like cryptocurrencies flock to PAXG.
PAXG Price Prediction
According to WalletInvestor, PAXG will go up from the $1,811 it is trading today to $2,261 by the end of the year. The crypto analysts are bullish about the future of the token and see it profiting investors in the long run. WalletInvestor also thinks PAXG price will be $3,774 by 2027 but does not see it matching Bitcoin soon. Alternatively, PricePrediction sees a bullish run for PAXg, saying it may reach $2,681 by the end of this year. However, their predictions for the gold-backed asset in five years is to see it get to a minimum of $16,395 by 2027. However, while forecasts can be great, crypto assets are still volatile, and anything can happen in the future. The advice to investors is to commit funds they can lose to crypto assets.
Since PAXG is directly correlated with Gold, the chart below shows the performance of Gold versus the Dollar. As long as the economical situation worsens, inflation becomes higher and the war in Ukraine becomes more intense, the price of Gold should continue to climb higher.
