Even as the price of gold retreats from an all-time high, stabilizing around $4,100 an ounce, tokens whose value is tied to the metal are gaining popularity in crypto markets. But not everyone subscribes to this idea.
The total market capitalization of gold tokens reached $3.86 billion, driven by the strong performance of and Paxos Gold (PAXG), according to CoinGecko data.
For Binance co-founder and former CEO Changpeng Zhao, however, these tokens are only as good as the promise behind them.
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“Gold tokenization is NOT ‘on-chain’ gold,” CZ wrote in an article on
Buyers’ reliance on centralized issuers to deliver physical gold, potentially decades from now and under uncertain circumstances, raises similar concerns to stablecoins, whose value is typically tied to currencies such as the dollar.
A recent report from NYDIG highlighted that even dollar-pegged tokens, like Circle Internet’s USDC and Tether’s USDT, can break their peg during times of extreme market stress. For NYDIG, terms like “peg” imply a guarantee that does not exist.
Indeed, during the recent $500 billion sell-off in the crypto market, Ethena’s USDe plunged 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 token ‘trust me, bro,’” CZ added. “This is why no ‘gold coin’ has really taken off.”
Even the largest according to CoinGecko, Tether Gold, has a market cap of just $2.1 billion. Compare that with its dollar counterpart, USDT, at $183 billion.
