With gold prices hitting record highs due to geopolitical tensions, we can expect a surge in activity within the gold stablecoin market. However, historical trends reveal a rather calm environment in this niche subsector.
Tether’s XAUT and Paxos’ PAXG are the major players in the gold stablecoin market. However, its market presence appears to be minimal compared to dollar stablecoins USDT and USDP. XAUT boasts a market capitalization of $580 million, while PAXG lags behind at less than $450 million.
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While we have seen a slight increase in trading volume on centralized exchanges for these gold stablecoins, it is important to note that this increase can be partially attributed to the rise in the value of gold.
The 7-day moving average volume of both stablecoins hit relative highs in mid-March but has since declined despite the continued rise in gold prices. These peaks are weaker than previous peaks, such as the 2023 regional banking crisis.
Volumes have slowly increased since hitting lows in May, but recent incidents have increased slightly. PAXG saw a significant increase in trading volume to $71 million on April 13 following the reported Iranian drone attack on Israel, the highest level since May 2022. Likewise, XAUT volume has also increased, albeit to a smaller extent.
Despite these developments, trading volume for the cryptocurrency asset remains relatively low at $71 million. In contrast, larger dollar-pegged stablecoins often trade billions of dollars per day on-chain alone. Dollar stablecoin trading volume is noticeably high on centralized exchanges (CEXs) due to its widespread use as a primary quoted asset.
In conclusion, the gold-backed stablecoin market remains niche despite the recent surge in gold’s popularity in the broader market.
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