While bitcoin ether and other major cryptocurrencies fell in a $19 billion sell-off event on Friday, leading gold-backed digital assets bucked the trend amid the precious metal’s rally.
Tokens pegged to physical gold, including Paxos’ PAXG and Tether’s XAUT, were among the few that held firm, and even rose, as broader markets sank.
Bitcoin lost 8.5% of its value in the last 24-hour period, while the broader crypto market plummeted 12.75% as measured by the CoinDesk 20 (CD20) index. Meanwhile, PAXG has fallen just 0.23% to $3,998, while XAUt has risen 0.2% to $4,010. One troy ounce of gold, which backs these tokens, closed near $4,018.
These coins are backed by reserves of the precious metal, offering cryptocurrency investors a haven from volatility that reflects gold’s historical role in traditional finance. So far this year, these tokens are up more than 50% amid gold’s historic rally.
But while gold-backed cryptocurrencies withstood the decline, there are signs that their underlying asset may be approaching fatigue. Gold has risen for eight consecutive weeks, which, according to the World Gold Council’s Markets Monitor, pushed the price into “overbought” territory. This occurs on daily, weekly and monthly charts, increasing the likelihood of a short-term reversal.
“With the ‘typical’ historical extreme of overbought (25% above the 40-week average) seen not far above here at US$4,023/oz, we would then be wary of the rally in this phase of gold’s uptrend running out, opening the door to a consolidation/corrective phase,” the report reads. “Net long positioning remains elevated, but is not yet considered extreme.”
In the broader crypto market, the road to recovery may now be a slow process. Liquidity constraints, weekend ETF closures, and a cautious return by market makers suggest a protracted bottoming process.
With trade tensions between the United States and China resurfacing, the floor could remain elusive.
