Gold

Bitcoin underperforms stocks, gold for the first time since 2018

Bitcoin’s yearly losses are similar to high-profile stocks like Tesla and Meta, with BTC investors down 70% in 2022.

Gold and stocks have underperformed in 2022, but the year has been difficult for Bitcoin (BTC) investors, in particular.

Worst year for Bitcoin since 2018

Bitcoin’s price looks prepared to close 2022 down nearly 70% — its worst year since the crypto crash of 2018.

*Bitcoin monthly returns. Source: Coinglass*

BTC’s depressive performance can be explained by factors such as the United States Federal Reserve hiking interest rates to curb rising inflationary pressures followed by the collapse of many crypto firms, including Terraform Labs, Celsius Network, Three Arrows Capital, FTX and others.

Some companies had exposure to defunct businesses, typically by holding their native tokens. For instance, Galaxy Digital, a crypto-focused investment firm founded by Mike Novogratz, confirmed a $555 million loss in August due to holding Terra’s native asset, LUNA, which has crashed 99.99% year-to-date (YTD).

*Click “Collect” below the illustration at the top of the page or follow this link.*

Meta, Tesla stocks mirror Bitcoin in 2022

The above catalysts have prompted Bitcoin to drop 65% year-to-date.

*BTC/USD daily price chart. Source: TradingView*

Meanwhile, the U.S. benchmark S&P 500 has plunged nearly 20% YTD to 3,813 points as of Dec. 28. That puts the index on its biggest calendar-year drop since the 2008 economic crisis. The bloodbath has proven to be worse for the tech-heavy Nasdaq Composite, down 35% YTD.

High-profile losers include Amazon, which has crashed approximately 50% YTD, as well as Tesla and Meta, whose stocks have dropped nearly 72.75% and 65%, respectively. As it looks, tech stocks and Bitcoin have suffered similar losses in 2022.

*BTC/USD vs. IXIC, TSLA, META YTD price performance. Source: TradingView*

Just as with Bitcoin, the Fed’s rate hikes remain the most-critical factor behind the U.S. stock market’s underperformance. But whether a tighter monetary policy would cause an economic recession in 2023 remains to be seen.

This uncertainty has driven capital toward the U.S. dollar for safety, with the U.S. Dollar Index (DXY), a barometer to gauge the greenback’s health versus top foreign currencies, rising nearly 8.5% YTD.

*DXY daily price chart. Source: TradingView*

Gold not such a “safe haven”

Spot gold is up 0.14% YTD to nearly $1,800 an ounce, which makes it a better performer than Bitcoin and the U.S. stock market.

*XAU/USD daily price chart. Source: TradingView*

Nevertheless, the year has seen gold deviating from its “safe haven” characteristics in the face of a stronger dollar and rising U.S. bond yields.

For instance, the precious metal is down 22% from its 2022 peak of $2,070, though some losses have been pared as the dollar’s uptrend lost momentum in the second half of 2022.

Bitcoin still winning since March 2020

Bitcoin had gained 1,650% after bottoming out in March 2020 below $4,000, boosted by the Fed’s quantitative easing policy. Even as of Dec. 28, investors who purchased Bitcoin in March 2020 are sitting on 332% profits.

*BTC/USD weekly price chart. Source: TradingView*

In comparison, U.S. stock market and gold‘s pandemic era-rally was small.

For instance, the Nasdaq Composite index grew up to 143% after bottoming out at 6,631 points in March 2020. So, investors who may have gained exposure in the Nasdaq stocks during the easing era are sitting atop a maximum of 56% paper profits as of Dec. 28.

*IXIC weekly price chart. Source: TradingView*

It‘s the same for gold, which rose a mere 43% during the pandemic era and is now up 26.50% when measured from its March 2020 bottom of around $1,450.

*XAU/USD weekly price chart. Source: TradingView*

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

What is stagflation, and how could it impact the cryptocurrency markets?

What is stagflation, how to fight it with crypto and how are the cryptocurrency markets impacted by high inflation and economic downturn?

What does stagflation mean for Bitcoin?

As stagflation goes alongside high inflation and economic downturn, BTC can be seen as a hedge against inflation and simultaneously as a risky asset whose price could fall during an economic decline.

BTC may be seen through the same lens as gold, which traditionally functioned as a hedge against inflation. Indeed, BTC could naturally be an excellent hedge against inflation. First, BTC is a decentralized global means of payment beyond the control of central authorities. Governments have no control over it, making it almost immune to potential corruption and monetary policy.

In addition, BTC is a scarce asset, as a maximum of twenty-one million can come into circulation and deflationary since the number of Bitcoin that goes into circulation halves approximately every four years. Because of this scarcity and finiteness, it is also called digital gold or a “store of value.”

In general, the prices of risky investments fall when interest rates rise. As the cryptocurrency market developed a significant correlation with the stock markets, much will depend on if and when BTC can break its correlation. This process will likely take time, also given institutional adoption.

Stagflation could be a catalyst for BTC and cryptocurrency adoption. This could happen if it turns out that the debt economy we build on is unsustainable. When Bitcoin is seen as an alternative or hedge against a failing financial system, prices and adoption can increase in economically uncertain times. A tipping point could come when public trust in BTC exceeds trust in the current economic system.

How to fight stagflation?

To fight stagflation, the government can implement monetary, fiscal and other policies that increase economic growth. Cryptocurrency may also prove to be a tool in itself.

The first tool is fiscal policy. Via an expansionary fiscal policy, one can increase government spending or decrease taxes to increase aggregate demand and stimulate economic growth. The government can cut spending to help reduce demand for goods and services, which could slow down inflation.

The second tool is monetary policy, which involves manipulating interest rates to try and stimulate the economy. Central banks use a low interest rate policy to decrease the cost of borrowing money. Interest policy can also reduce the amount of money in circulation to decrease the money supply, which may help boost economic growth over time.

The third tool is to try and reduce unemployment through active labor market policies. However, here there is the risk of built-in inflation, which refers to the demand for wage increases in the labor markets to meet the rising cost of living. Yet, this often results in businesses increasing the prices of goods and services to offset increasing wage costs.

If these measures fail, other options include raising tariffs or devaluing the domestic currency to make exports more competitively priced on foreign markets. Selling bonds or other financial instruments can decrease the money supply by taking that amount out of circulation.

Cryptocurrencies may also directly help fight stagflation by allowing people worldwide to participate in global trade without needing to go to a bank or a different institution. The increased access that people have to international markets can help improve global economic conditions and lead to more sustainable growth overall.

How does stagflation affect cryptocurrency markets?

Cryptocurrencies have not been around for very long. Hence, there is not much data yet on whether cryptocurrency is a good investment during stagflation and if stagflation is generally good or bad for the markets.

To grasp if cryptocurrency investments work well during stagflation, one can examine how traditional markets behave during inflation or stagflation and why. Stagflation is naturally bad for traditional markets, and as cryptocurrency markets have a high correlation with general indexes, meaning that negative sentiment can trickle into cryptocurrencies which are digital assets managed with cryptographic algorithms.

In general, investors who have their money in traditional instruments may be more willing to ride out periods of economic uncertainty than those who invest in cryptocurrencies that go along with higher volatility. During stagflation, there thus may be less demand for cryptocurrencies than usual.

Stagflation may also hurt cryptocurrency markets because it makes retail investors less interested in buying digital assets. After all, high inflation directly impacts how much money people have to purchase cryptocurrency, which is considered a more risky investment.

Yet, depending on one’s cryptocurrency investing strategy, one may choose to invest in these assets over traditional financial instruments. Cryptocurrencies run on a blockchain and are not tied to any particular country’s monetary policy like fiat currencies are. When inflation rises in one country but not another, investors can still capitalize on gains realized through cryptocurrency investments, even if their home currency loses value due to inflationary pressures.

Investors will often look for a way to protect their wealth from stagflation, especially in countries like Venezuela or Argentina, where hyperinflation occurs. Hyperinflation is when there is a speedy and uncontrollable price increase of vital goods and services in an economy. Here cryptocurrency investments work well during stagflation as they provide an alternative payment means and protect against hyperinflation. Individuals may choose to flee hyperinflation by re-directing some of their reserves into Bitcoin (BTC).

What causes stagflation?

Stagflation can be caused by an increased cost of living that outpaces consumer demand or production levels or a reduction in the gross domestic product, which can happen when a government imposes austerity measures. There are several other causes of stagflation, including supply shocks and monetary policy errors.

A supply shock is an event that causes prices to rise without any change in aggregate demand or companies’ inventory. These shocks can be provoked because of human actions. For example, a conflict between states may increase oil prices or another essential input into the production process, leading to cost-pull inflation, which is inflation due to an upsurge in the costs as a result of rising wages and raw materials.

Supply shocks can also include increases in prices due to natural disasters, leading to higher prices. Simply put, a change in the production process thus results in a decrease in the supply of goods or services, leading to demand-pull inflation, a specific type of inflation caused by supply shortages.

Monetary policy errors refer to how central banks manage their country’s money supply. Suppose they make too much money available for lending due to low interest rates. In that case, interest rates will fall, causing inflationary pressures on consumers’ wages and prices. However, with very high interest rates, a decline in economic activity may also result in stagflation.

What is stagflation?

Stagflation is a relatively rare phenomenon that may go alongside economic stagnation. Stagflation contrasts with inflation alongside economic growth, which occurs when prices increase alongside a higher output of the economy.

Economic stagnation occurs when the economy is not growing fast enough to meet the needs of its people. Stagflation is when the economy fails to develop and is also marked by high inflation. Stagflation can be seen as a contradiction because those circumstances usually do not coincide.

During stagflation, an economy grows so slowly that unemployment rises. Meanwhile, prices continue to increase as if companies sell everything they can produce. There is a smaller demand for goods and services, which may lead to even greater unemployment.

In an economy with high inflation rates, individuals do not know how much capital they will be able to spend in the future. Inflation makes it hard to plan and invest in the present because no one knows what their income will be after a certain amount of time. That causes even more uncertainty and slower growth. Thus, stagflation is a combination of two words: economic stagnation and inflation.

One of the most adequate examples of stagflation was during the 1970s, when several developed economies experienced slow economic growth, high unemployment and rising inflation due to global fuel shortages. Stagflation may also happen due to monetary or fiscal policy, such as when the United States decoupled its dollar from the gold standard in said period.

Bitcoin price reaches $21K as crypto market cap nears $1T

The gains keep coming for BTC and crypto for a second day as the U.S. dollar drops.

Bitcoin (BTC) returned to $21,000 for the first time since September after the Oct. 26 Wall Street open as buyers solidified gains.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

BTC bulls “eat” ask liquidity

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it hit local highs of $21,012 on Bitstamp.

At the time of writing, the pair continued to explore territory out of reach for over six weeks.

Liquidations also kept flowing, with the past 24 hours delivering $750 million in liquidated positions on Bitcoin alone, according to data from Coinglass.

Cross-crypto liquidations totaled $1.43 billion, adding to what was already the highest tally in 2022 so far.

*Crypto liquidations chart. Source: Coinglass*

The impetus did not come from United States equities on the day, which were treading water as Bitcoin played catch-up while reducing overall risk-asset correlation.

The spotlight was instead on gold, which also saw a relief rally as the U.S. dollar struggled. The U.S. dollar index (DXY) circled its lowest levels since Sep. 20.

*U.S. dollar index (DXY) 1-day candle chart. Source: TradingView*

Tracking the order book on the largest global exchange, Binance, analytics platform Material Indicators noted ask liquidity was moving higher.

“A big chunk of ask liquidity was eaten in the past 24 hours and some has been replenished, but there is no question that BTC bulls got some help when blocks of bid and ask liquidity were adjusted upward,” it wrote in part of a Twitter update.

*BTC/USD order book data. Source: Material Indicators/Twitter*

$21,000 formed a key level for some analysts, among them Il Capo of Crypto, who previously forecast the market retracing at that point to retarget macro lows.

Fellow trader and analyst Rekt Capital also noted that Bitcoin was not yet out of the woods when it came to its comedown from all-time highs.

“On the normal scale, BTC is breaking its year-long downtrend,” he tweeted alongside comparative charts.

“On the log scale however, the year-long downtrend is still far away from being tested.”

*BTC/USD annotated log chart. Source: Rekt Capital/Twitter*

Crypto market cap eyes key milestone

Beyond Bitcoin, there was also good news for crypto markets in general.

Related: Why is the crypto market up today?

The overall crypto market capitalization, which had lost significant value over the year, came within 5% of the $1 trillion mark on the day.

“Total Market Cap of crypto is up 2.5% today,” David Gokhstein, founder of Gokhstein Media, reacted, noting the euphoric feeling among market participants.

*Crypto market cap 1-day candle chart. Source: TradingView*

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin ‘6–8 weeks’ from breakout as Hang Seng echoes Lehman Brothers dip

Volatility is closing in, but traders may have to wait until the end of the year if history is to repeat itself, one analyst warns.

Bitcoin (BTC) waited for cues at the Oct. 24 Wall Street open as expectations of a breakout ran high.

Hang Seng drops most since 2008

Data from Cointelegraph Markets Pro and TradingView tracked a mundane trading day for BTC/USD after the pair hit weekly highs of $19,700 overnight.

Despite what Michaël van de Poppe, CEO and founder of trading firm Eight, called “way worse than expected” manufacturing data from the United States, Bitcoin suffered from a declining trajectory on the day.

This led on-chain analytics resource Material Indicators to suspect that resistance would remain in place.

“Sunday BTC failed all attempts to reclaim the 2017 Top,” it said, summarizing the latest 24 hours’ price action as per its proprietary trading indicators.

“The change in the trajectory of Trend Precognition’s A1 Slope Line after the D and W close indicates a loss of momentum. Price is currently pinned between the 50-Day MA and the trend line awaiting the TradFi open.”

Van de Poppe, meanwhile, put the sell levels to beat at $19,600 and $20,700, adding that the U.S. dollar and U.S. bond yields were “showing some slight weakness.”

“Upwards momentum is fading on bond yields,” popular trading account Game of Trades continued.

“When this last happened, the markets went on a big run.”

It was nonetheless macro markets offering clearer signs of volatility to come on the day, specifically in Asia, where the Hong Kong Hang Seng saw its biggest daily drop since the Lehman Brothers implosion in 2008.

*Hang Seng Index 1-day candle chart. Source: TradingView*

Game of Trades likewise considered the S&P 500 as a potential source of a “massive move” with volatility increasing.

*S&P 500 volatility annotated chart. Source: Game of Trades/Twitter*

“Big expansive move” may be months off for BTC

For Bitcoin, volatility could be a long time coming, as a classic indicator delivers signals seen only a handful of times before.

As noted by Filbfilb, co-founder of trading suite DecenTrader, Bitcoin’s Bollinger Bands continue to contract on weekly timeframes, reaching rare levels.

“The outcome of each example is obviously a big expansive move,” he told Twitter followers on the day.

“The funny part is that in each of the examples, BTC spent 6-8 weeks tightening further from the width level we are now at, before a big expansive move, so I’m afraid there’s a good chance this thing winds up further.”

*BTC/USD comparative annotated charts. Source: Filbfilb/Twitter*

Whether up or down, Bitcoin’s current increasing correlation with gold was something to take note of, Charles Edwards, founder of asset manager Capriole, added.

“Bitcoin bottoms often align with high correlation to Gold. We have that today,” he declared alongside a comparative chart of previous such periods.

“It is much better when Bitcoin is correlated to Gold. Unshackled.”

*BTC/USD vs. gold correlation annotated chart. Source: Charles Edwards/Twitter*

Bitcoin and gold face headwinds amid strengthening dollar

Bitcoin decoupled with the stock market and saw its correlation with gold rise to a level not seen since last year.

Bitcoin (BTC) and gold are no longer investors’ primary choices as inflation hedges amid the strengthening United States dollar. The current turmoil in financial markets added to the geopolitical tensions has run havoc on the majority of the assets that investors prefer to invest in during times of financial crisis.

Bitcoin has lost nearly 70% of its market cap since the market top last year while gold, which strengthened its position in the first quarter of the year despite the Russia-Ukraine crisis, is currently down by 10% year-to-date.

The negative market condition has forced BTC to shed its correlation with tech stocks, while at the same time, the top cryptocurrency’s correlation with the precious metal has reached levels not seen in over a year.

The correlation between Bitcoin and gold over the past year has largely fluctuated between -0.2 and +0.2. However, the correlation between the two assets reached +0.3 last week, the highest in one year.

*Bitcoin’s correlation with gold Source: Kaiko Research*

A correlation reading of +0.3 is considered slightly positive, while a value of +0.7 is regarded as a strong correlation. Thus, even though the BTC-gold correlation has reached a yearly high, it still has not reached a significant level where the price momentums mimic each other.

Apart from Bitcoin and gold, United States Treasury bonds and other stocks have also faced a similar fate. Experts believe the strengthening dollar added to the ongoing market conditions has forced investors to look beyond safe haven assets.

Karim Dandashy, portfolio manager at digital assets investment platform StableHouse, told Cointelegraph:

“Obviously, it’s not been a great year for Bitcoin. Nor has it for traditional risk-off assets like gold and U.S. [Treasury bonds]. The charts say it all, the dollar has been the winner. This is ironic as investors would seek refuge in yield or growth assets, but the risk of recession and attempted QT have driven investors to hoard dollars.”

Bitcoin might be struggling to keep up with the inflation hedge narrative, however, it is important to note that BTC is still a nascent asset class when compared to others. The top cryptocurrency is still among the best-performing assets over the past five years.

Global Bitcoin adoption is ‘still in its infancy,’ but here’s how it might accelerate

Rome wasn’t built in a day, and it will also take some time for every country on Earth to adopt BTC.

Bitcoin (BTC) adoption by governments and companies remains a dubious question, and the “digital gold” thesis proposed by advocates faced harsh critics after Tesla sold 75% of its holdings in the second quarter of 2022.

Larger entities buying or selling Bitcoin have always moved the needle on how close countries are to using cryptocurrencies as a store of value. Currently, the average purchase price of El Salvador’s Bitcoin holdings stands at $45,000, making it a rather unprofitable investment.

Regardless of how long adoption by the large institutional holders will take and its subsequent impact on price expectations, it is possible to roughly estimate a minimum price per BTC based on each country’s foreign currency and gold reserves.

El Salvador might have been the first country to adopt Bitcoin as legal tender, but its 2,381 BTC position represents less than 2% of the country’s total reserves. More importantly, the South American republic does not rank among the top 100 countries in terms of its gross domestic product.

Jamaica, on the other hand, has a population that is 56% smaller than El Salvador and its international reserves are 30% higher at $4 trillion. Even Trinidad and Tobago, a tiny island country in the Caribbean with the same population size as San Diego, California, holds $6.9 trillion in reserves.

What becomes clear is how tiny (economically) El Salvador is in comparison with the aggregate $15 trillion held by the 160 countries included in World Bank data.

Would it be possible for other economies to buy their reserves at Bitcoin’s current $20,000 price, and how many coins could each country potentially acquire depending on the price of BTC?

Could every government match its reserves with BTC?

*Countries’ total reserves, including gold, in USD. Source: statisticsanddata.org*

For starters, $15 trillion is 39 times larger than Bitcoin’s $385 billion market capitalization at the current $20,000 per coin. Theoretically, 750 million BTC would be required for every country to replace their gold and foreign currency holdings. Even a conservative 3% allocation would represent 22.5 million BTC, which exceeds the total number of coins in circulation.

Furthermore, not every Bitcoin is available for sale and an estimated 3.7 million BTC coins have been lost since 2009, according to blockchain forensics firm Chainalysis.

This brings the current supply closer to 15.5 million coins, making the 3% allocation using foreign reserves even more impossible at the current $20,000 price.

Assuming that every holder is willing to sell their coins, the minimum average price needed would be $29,000 for a 3% allocation, equivalent to $450 billion.

*Bitcoin UTXO age distribution. Source: Unchained Capital*

However, a more realistic approach is needed since 3.8 million BTC coins have not moved over the past three years, meaning the owner held during the sub-$4,000 crash in March 2020 and the $69,000 peak in November 2021. Thus, the adjusted liquid coins currently in circulation is 11.7 million, meaning the minimum average price for a $450 billion allocation would reach $38,500 per Bitcoin.

Here is why $38,500 per BTC would be a “good deal”

The Prisoner’s dilemma is a typical example of the game theory study that demonstrates why two rational actors may refuse to cooperate even though it appears to be in their best interest. Betrayal is the dominating strategy for both sides, which is the most likely reaction in all scenarios.

For example, Switzerland alone holds $1.1 trillion in foreign and gold reserves, meaning their 3% allocation would amount to $33.3 billion. It is unthinkable that some entity would be able to grab over 1 million coins without raising alerts. The remaining countries would have a harder time finding large quantities at similar price levels.

For example, on Oct. 8, 2020, Bitcoin price rallied close to $11,000 after Square announced a $50 million BTC purchase. More recently, on Feb. 8, 2021, Bitcoin jumped by almost $3,000 in minutes as reports emerged that Tesla had bought $1.5 billion worth of BTC.

Moreover, the Prisoner’s dilemma theory indicates incentives to suppress coordination efforts in terms of a price or allocation cap. Either a country would front-run others by buying ahead of the group or exceeding the proposed 3% allocation to further protect their balance sheet.

Assuming that countries respect the $38,500 price limit and every Bitcoin coin that has moved in the past three years is offered for sale, the holdings — considering foreign and gold reserves — per country would total 2.67 million BTC to China and 1.1 million BTC to Japan. Switzerland would hold 864,800 BTC and the United States would be in possession of 558,000 coins.

Note that the United States’s currency holdings have not been included in the World Bank data, but the Federal Reserve currently holds $8.8 trillion of assets on its balance sheet.

Ultimately, El Salvador’s investment was a drop in the bucket and Bitcoin adoption as a global store of value is still in its infancy.

Furthermore, game theory would present incentives for countries to surpass any agreed limit and not observe price caps, making the theoretical $38,500 estimate way too conservative.

What is PAX Gold (PAXG) and how does it work?

PAX Gold is a cryptocurrency and gold hybrid that bridges the gap between the two investment options. It offers the security and stability of cryptocurrencies.

In recent years, nonfungible tokens (NFTs), cryptocurrencies and other modern investment options have become trendy. However, physical commodities such as gold are still in high demand. In 2021, the global market capitalization for cryptocurrency surpassed $2 trillion. Now, investors must ask themselves: which option should I choose — crypto or gold?

Gold is a commodity that dates back thousands of years as a store of value and as a means of exchange and is still successful today. Even with the invention of decentralized digital cryptocurrency, gold has remained just as prominent. Although, for most individual investors, owning gold can be difficult and out of reach. There is one crypto company, PAX Gold (PAXG), whose goal is to make gold ownership more democratic and available to everyday investors by allowing them to trade it like any other cryptocurrency.

PAX Gold has discovered a method to combine cryptocurrency with physical gold assets, making it attractive to investors accustomed to conventional alternatives. This article will discuss PAX Gold (PAXG) and analyze how the cryptocurrency works.

What Is PAX Gold?

Paxos Gold is a cryptocurrency that is backed by real gold reserves held by Paxos, a for-profit company in New York. Each PAXG token is linked to a 1:1 ratio to one troy ounce (t oz) of a 400-ounce London Good Delivery gold bar stored at Brinks Security vaults in London. The Paxos-backed cryptocurrency, PAXG, is backed by the London Bullion Market Association (LBMA) certified gold bars and may be redeemed for actual bullion.

PAX Gold investors are spared the trouble of storing and securing physical gold, as well as transporting it. Also, shares can be bought fractionally, which makes it more accessible for retail investors who otherwise would be hindered by the high cost of gold. PAX Gold boasts a combination of qualities from both physical gold ownership and cryptocurrency that provide solutions to many modern-day challenges in the gold market such as high costs, storage concerns and the lack of liquidity.

Who Is Behind PAX Gold?

The Paxos Trust Company, a financial institution and tech company based in New York City that specializes in blockchain technology, created PAX Gold. Charles Cascarilla and Richard Teo, both former analysts at different firms (Cascarilla at Goldman Sachs and Teo at Cedar Hill Capital Partners), founded Paxos in 2012.

PAX Gold is not the only crypto project that Paxos has undertaken. In addition to PAX Gold, they have also created PAX Dollar (USDP), a digital United States dollar and stablecoin. They have received strong institutional support and have raised over $500 million in total funding from investors like OakHC/FT, Mithril Partners and PayPal Ventures.

How does PAXG work?

The PAX Gold token is built on the Ethereum blockchain, which gives it portability among wallets, exchanges, decentralized finance (DeFi) platforms, and other apps that use Ethereum. PAX Gold allows users to trade, stake or redeem their tokens for high-quality gold bars. These gold bars are accredited by the London Bullion Market Association and stored in secure vaults around the world. Even with these top-notch security measures and high-quality gold, PAX Gold doesn’t charge any custodial or storage fees — only a 0.02% transaction fee.

Is Pax Gold safe? PAX Gold is not only accredited with a gold standard, but it also functions dependably and transparently. Both PAX Gold and its holding company, Paxos Trust, are under the legal jurisdiction of the New York Department of Financial Services (NYDFS). Furthermore, PAX Gold protects the consumer and the company’s assets independently, ensuring that the consumer is secure in the event of bankruptcy.

PAXG undergoes monthly audits from a third-party auditing firm to ensure that its gold reserves match the supply of PAXG tokens. The reports from these attestations are released on Paxos’ official website. In addition, PAXG’s developers run regular smart contract audits to search for any potential bugs or vulnerabilities in the network.

Is Pax Gold real gold?

As mentioned earlier, Pax gold is tokenized gold that operates on a blockchain network. Tokenization is the digital transformation of both physical and intangible assets into cryptocurrency. The PAXG token specifically represents physical gold from the Paxos trust company. Gold is a good store of value because it keeps its value over time. As such, it is often used as a hedge against inflation. When the USD loses value, gold becomes more expensive in USD and vice versa. This makes gold a popular choice for investors looking to protect their wealth from inflation.

The PAXG tokens have serial numbers that match those of individual gold bars. The serial number, value and other characteristics of a holder’s physical gold may be discovered by inputting an individual’s Ethereum wallet address on the PAXG lookup tool. They also have the option to convert their PAXG into fiat money, another cryptocurrency or allocated and unallocated gold bullion bars at the current market price of gold.

What’s the difference between PAXG and gold ETFs?

The main difference between a gold ETF and Pax Gold is that an ETF purchases a contract that mimics the price of gold, but the user does not own the underlying asset. Each PAXG token is directly linked to a real gold bar kept in a London vault, with each PAXG token being equivalent to one.

Gold exchange-traded funds (ETFs) track the value of the underlying commodity. They just give investors access to the price of gold, but not ownership. An investor who owns a gold ETF is a party in an agreement that gives him or her a specific fraction of the pooled gold. Gold ETFs can’t compare to full ownership of the metal. For example, by the time settlement occurs, the contract value may be lower than what you would get if you simply owned the gold outright.

In contrast, a PAXG is a digital representation of physical gold. Each PAXG token represents one troy ounce of gold in London vaults that can be identified by sequential numbers. Trading PAXG does not take days to settle as physical gold bar trading might do because it is handled on Ethereum as an ERC-20 token.

PAX Gold is the perfect investment for both traditional and modern investors who want to stay on trend without compromising their personal goals. With actual gold assets reflected in crypto tokens, you can invest in both physical and digital resources with a single investment, taking advantage of the best aspects of each.

How does PAX gold make money?

PAX Gold will earn revenue in two ways: a small premium on the gold and a tokenization fee at the time of initial purchase. The percentage for the tokenization fee depends on the amount purchased initially; it is 1% for purchases of one ounce or less but significantly lower for larger purchases. Paxos will not charge custody fees, but it will charge a fee of 0.02% whenever a customer wants to buy or sell a token on a blockchain network.

Can you stake PAXG? You can earn interest on your PAXG by lending it to a custodian, but rates will differ depending on the lender. Staking your PAXG also allows you to earn interest, but you must lock up your tokens for a specific period of time. How to buy PAXG? The token is available for purchase on several exchanges, including Binance, Kraken, KuCoin and Coinbase. Here are the steps to buy PAXG tokens on the Coinbase crypto exchange:

Download a self-custody wallet that supports PAXG like the Coinbase wallet.
Securely store your recovery phrase.
Understand and prepare for Ethereum network fees.
Buy and transfer Ether (ETH) to your self-custody wallet.
In the trade section, use the ETH to purchase PAX Gold.

The future of asset-backed tokens

Asset-backed tokens are digital representations of physical assets that can be redeemed for the underlying asset. That asset could be gold, oil, real estate, equity, soybeans or just about any other commodity.

Asset-backed tokens are cracking open markets that were once inaccessible and costly by making transactions that don’t need a central figure. By doing this, we’re ensuring both security and transparency in business relationships. This is changing the way we do business for the future and how we think about ownership and wealth creation.

Asset-backed tokens may also help to address issues caused by inflated or depreciated currencies, as well as the unpredictable stock market. Individuals have a viable new financial choice that combines digital liquidity with real asset values when needed, thanks to asset-backed tokens’ potential. We’ve already seen how asset-backed tokens are being used in numerous applications.

The future of asset tokenization is only as limited as the imagination. With new use cases being discovered every day, it’s exciting to think about all the possibilities for how asset-backed tokens can help people and businesses around the globe.

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Warren Buffett pivots to U.S. Treasuries — a bad omen for Bitcoin’s price?

Berkshire Hathaway now allocates 60% of its cash portfolio to T-bills, leaving individual investors with the potential to mirror a similar strategy.

Warren Buffett has put most of Berkshire Hathaway’s cash in short-term U.S. Treasury bills now that they offer as much as 3.27% in yields. But while the news does not concern Bitcoin (BTC) directly, it may still be a clue to the downside potential for BTC price in the near term.

Berkshire Hathaway seeks safety in T-bills

Treasury bills, or T-Bills, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money-market funds and certificates of deposits (COD) because of their tax benefits.

Berkshire’s net cash position was $105 billion as of June 30, out of which $75 billion, or 60%, was held in T-bills, up from $58.53 billion at the beginning of 2022 out of its $144 billion total cash reserves.

The move is likely a response to bond yields jumping massively since August 2021 in the wake of the Federal Reserve’s hawkish policies aimed at curbing inflation, which was running at 8.4% in July.

For instance, the three-month U.S. T-bill returned a 2.8% yield on Aug. 22 compared to a near-zero yield a year ago. Similarly, the yield on U.S. one-year T-bill climbe from zero to 3.35% in the same period.

*U.S. 3-month and 1-year bond yield versus BTC/USD daily timeframe chart. Source: TradingView*

Meanwhile, non-yielding assets like gold and Bitcoin have dropped roughly by 2.5% and 57% since August 2021. The U.S. stock market benchmark S&P 500 likewise saw a decline, losing nearly 7.5% in the same period.

Such a difference in performance presents T-bills as an ultra-safe alternative for investors when compared to gold, Bitcoin and stocks. Buffett’s T-bill strategy suggests the same, namely a bet on more downside for risk-on assets in the near term — particularly as the Fed gears up for more rate hikes.

“Buffett is a value investor, so he won’t allocate much when the equity markets are as overvalued as they have been for the last five years,” said Charles Edwards, founder of quantitative crypto fund Capriole Investments.

Meanwhile, Andrew Bary, an associate editor at Barron’s, underscored the market’s potential to tail Buffett’s strategy, saying:

“Individual investors may want to consider following Buffett’s lead now that they are yielding as much as 3%.”

Bitcoin: safe-haven or risk-on?

Positive-yielding debts risk are dampening the demand for other potential safe-havens, Bitcoin included. In other words, increasingly risk-averse investors could be opting for assets that offer fixed yields over those that don’t.

The performance of Bitcoin-focused investment funds in August supports this argument with capital outflows for three weeks in a row, including a $15.3 million exit in the week ending Aug. 19.

Overall, these funds have lost $44.7 million on a month-to-date basis, according to CoinShares’ weekly report. In total, digital asset investment products, including BTC, have witnessed month-to-dat outflows totaling $22.2 million.

Does that mean Bitcoin will continue to lose its sheen against positive-yielding U.S. government debts? Edwards does not agree.

“Allocation to treasuries and other low-yield cash products is really a decision that needs to be made case-by-case depending on an individual’s goals and risk appetite,” he explained, adding:

“In the short-term, there are times it makes sense to hedge against Bitcoins volatility with cash, the best cash being the US Dollar. But, in the long-term, I think all fiat currencies tend towards zero against Bitcoin.

Edwards also points out that Buffett’s long-term strategy remains largely risk-on. Notably, Berkshire deployed 34% of its cash holdings to buy equities in May and that over 70% of its portfolio is still made up of risk-on assets.

“Looking at Buffett’s 75% risk allocation; and knowing that Bitcoin has been the best performing asset of all asset classes in the last decade, having the highest risk-adjusted returns, I know where I would be putting my money,” he add.

Buffett’s portfolio, however, will likely continue to eschew direct BTC investment as the “oracle of Omaha” remains a fierce critic. In February 2020, he said that it “does not create anything,” adding:

“I don’t own any cryptocurrency. I never will… You can’t do anything with it except sell it to somebody else.”

Earlier this year, however, Buffett’s Berkshire Hathaway increased exposure in a Bitcoin-friendly neobank while reducing its stake in Visa and Mastercard.

Warren Buffett pivots to US Treasurys — A bad omen for Bitcoin price?

Berkshire Hathaway now allocates 60% of its cash portfolio to T-bills, leaving individual investors with the potential to mirror the strategy.

Warren Buffett has put most of Berkshire Hathaway’s cash in short-term United States Treasury bills, now that they offer as much as 3.27% in yields. But while the news does not concern Bitcoin (BTC) directly, it may still be a clue to the downside potential for its price in the short term.

Berkshire Hathaway seeks safety in T-bills

Treasury bills, or T-bills, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money-market funds and certificates of deposit because of their tax benefits.

The move is likely a response to bond yields jumping massively since August 2021 in the wake of the Federal Reserve’s hawkish policies aimed at curbing inflation, which was running at 8.4% in July.

For instance, the three-month U.S. T-bill returned a 2.8% yield on Aug. 22 compared with a near-zero yield a year ago. Similarly, the yield on the U.S. one-year T-bill climbed from zero to 3.35% in the same period.

Meanwhile, non-yielding assets like gold and Bitcoin have dropped roughly by 2.5% and 57%, respectively, since August 2021. The U.S. stock market benchmark S&P 500 likewise saw a decline, losing nearly 7.5% in the same period.

Such a difference in performance presents T-bills as an ultra-safe alternative for investors compared with gold, Bitcoin and stocks. Buffett’s T-bill strategy suggests the same, namely a bet on more downside for risk-on assets in the near term — particularly as the Fed gears up for more rate hikes.

“Buffett is a value investor, so he won’t allocate much when the equity markets are as overvalued as they have been for the last five years,” Charles Edwards, founder of quantitative crypto fund Capriole Investments, told Cointelegraph.

Meanwhile, Andrew Bary, an associate editor at Barron’s, underscored the market’s potential to tail Buffett’s strategy, saying:

“Individual investors may want to consider following Buffett’s lead now that they are yielding as much as 3%.”

Bitcoin: Safe haven or risk-on?

The risks of positive-yielding debts are dampening the demand for other potential safe havens, Bitcoin included. In other words, increasingly risk-averse investors could be opting for assets that offer fixed yields over those that don’t.

The performance of Bitcoin-focused investment funds in August supports this argument, with capital outflows for three weeks in a row, including a $15.3 million exit in the week ending Aug. 19.

Does that mean Bitcoin will continue to lose its sheen against positive-yielding U.S. government debts? Edwards disagrees.

“Allocation to Treasurys and other low-yield cash products is really a decision that needs to be made case-by-case depending on an individual’s goals and risk appetite,” he explained, adding:

“In the short-term, there are times it makes sense to hedge against Bitcoin’s volatility with cash, the best cash being the U.S. dollar. But in the long term, I think all fiat currencies tend toward zero against Bitcoin.”

Edwards also pointed out that Buffett’s long-term strategy remains largely risk-on. Notably, Berkshire deployed 34% of its cash holdings to buy equities in May, and over 70% of its portfolio is still made up of risk-on assets.

“Looking at Buffett’s 75% risk allocation and knowing that Bitcoin has been the best-performing asset of all asset classes in the last decade, having the highest risk-adjusted returns, I know where I would be putting my money,” he added.

Buffett’s portfolio, however, will likely continue to eschew direct BTC investment, as the “Oracle of Omaha” remains a fierce critic. In February 2020, he said that it “does not create anything,” adding:

“I don’t own any cryptocurrency. I never will. […] You can’t do anything with it except sell it to somebody else.”

Earlier this year, however, Buffett’s Berkshire Hathaway increased itsexposure to a Bitcoin-friendly neobank while reducing its stake in Visa and Mastercard.

Sub-$22K Bitcoin looks juicy when compared to gold’s market capitalization

BTC’s market cap is way smaller than gold’s, but the percentage of Bitcoin held by institutional investors suggests that the current pricing reflects an excellent discount.

Bitcoin’s (BTC) price is down 56% year-to-date, but the correction was not strong enough to remove the digital asset from the list of top-20 global tradable assets. Bitcoin’s current $400 billion market capitalization stands higher than traditional companies like Exxon Mobil, Walmart and Procter & Gamble, but there’s always the question of whether a direct comparison between a commodity like Bitcoin and equities is valid.

*Most valuable tradable global assets. Source: 8marketcap.com*

Analysts and investors favoring stocks constantly remind crypto advocates that Exxon Mobil posted $25.79 billion in earnings over the past 12 months, as a justifying example of its valuation. But on the flip side, earnings don’t necessarily explain how Boeing booked $16.1 billion losses in two years, even as it holds an $87.1 billion market capitalization.

Measuring a commodity market value can be tricky. For example, in the case of silver, only 50% of precious metal is used in industrial applications. There are individuals and companies holding the asset for investment in the form of bars, coins, or jewelry and these are not “productive” revenue-generating assets.

Bitcoin’s value is vastly inferior to gold’s $11.2 trillion market capitalization, but what does “$400 billion” even mean, and how does it compare to broader asset classes such as global equities, real estate and debt markets?

Was the Bitcoin “digital gold” thesis wrong?

The first question one should ask is: Has gold been a good store of value over the past five years? To find answers, traders have to compare its price against other trillion-dollar asset classes like global equities, oil and real estate. The overall goal for any store of value is to maintain the purchasing power, regardless of price fluctuations during the period.

*Gold vs. WTI oil, S&P500 index, and Case-Shiller Home Price. Source: TradingView*

From July 2017 until July 2022, gold has underperformed the remaining asset classes by 18% or higher. The precious metal broke above $2,000 in August 2020, but it could not keep up with the ever-growing prices of stocks, housing and energy. In comparison, the United States monetary base, bank deposits and cash, expanded by 48.5% in the same period.

One could argue that gold has failed to sustain its purchasing power over time, but it’s likely that more time is needed to evaluate how the precious metal will behave if the current global crisis accelerates or extends longer than expected. Meanwhile, in this same time period, Bitcoin presented 840% gains from July 2017 to July 2022.

Here’s the solution to Bitcoin’s price volatility

There’s a valid question about Bitcoin’s volatility and rightfully so given the fact that the asset regularly faces 20% or higher weekly price moves. But there’s a simple and quick solution to alleviate this oscillation, or at least reduce the impact on a longer time frame. The dollar cost average (DCA) strategy consists of regularly buying pre-set amounts of an asset on a daily, weekly or monthly basis.

*Bitcoin price in USD vs. 5-year moving average. Source: TradingView*

For instance, following this strategy for the past five years would have resulted in a $19,192 average entry cost. So even if the 8.3% gain to the current $20,800 price might not be enough to compete with gold, it certainly shows a more predictable form in which to use Bitcoin as a long-term store of value.

The gold ETF vs. Bitcoin investment products

According to CryptoCompare, the Bitcoin investment vehicles under management (AUM) totaled $15.9 billion in June. This metric includes exchange-traded products such as Grayscale GBTC and exchange-traded notes from multiple providers. This ratio is equivalent to 4% of Bitcoin’s current $400 million market capitalization.

*Total crypto listed investment vehicles, USD billion. Source: CryptoCompare*

In comparison, the gold-backed ETF products stood at $221.7 billion in June, according to data from GoldHub. If one excludes the 50% “non-financial-related use of gold” like jewelry and industry, the remaining market capitalization stands at $5.6 trillion. Therefore, the fund‘s exchange-traded investment vehicles correspond to 4% of the adjusted gold‘s market value.

At $20,800, Bitcoin‘s investment vehicle holdings ratio matches the gold markets. While the $400 million market cap level might concern some investors, the asset’s adoption is minimal compared to the adoption of gold, a precious metal with a 7,000-year history as an investment vehicle.

Considering the fiv-year period that was analyzed and using a simple DCA strategy to rule out sharp price oscillations, gold is currently a better store of value, but that does not invalidate Bitcoin’s 8.3% gain in the period. In short, both assets have yet to prove themselves.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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