Even as the price of gold retreats from an all-time high, stabilizing around $4,100 per ounce, tokens whose value is pegged to the metal are gaining popularity in crypto markets. But not everyone agrees with the premise.
The total market capitalization of gold tokens has risen to $3.86 billion, driven by the strong performance of and Paxos Gold (PAXG), according to data from CoinGecko.
However, for Binance co-founder and former CEO Changpeng Zhao, these tokens are only as good as the promise behind them.
Charging…
“Gold tokenization is NOT ‘on-chain’ gold,” CZ wrote in a post on
Buyers’ reliance on centralized issuers to deliver physical gold, potentially decades from now and under uncertain circumstances, raises concerns similar to those faced by stablecoins, whose value is typically pegged to currencies like the dollar.
A recent NYDIG report noted that even dollar-pegged tokens like Circle Internet’s USDC and Tether’s USDT can break their ties during times of extreme market stress. For NYDIG, terms like “fixation” imply a guarantee that does not exist.
In fact, during the recent $500 billion crypto market sell-off, Ethena’s USDe plummeted as low as $0.65 on Binance and saw declines on other exchanges, while USDC and USDT traded above $1.
Tokenized gold, while attractive as a hedge, can carry the same risks in disguise.
“It’s a ‘trust me, bro’ token,” CZ added. “This is why no ‘gold coin’ has really taken off.”
Even the largest according to CoinGecko, Tether Gold, has a market capitalization of only $2.1 billion. Compare that to its dollar stablemate, USDT, at $183 billion.
