Gold-backed stablecoins such as Paxos Gold (PAXG) and Tether Gold (XAUT) are in high demand amidst the ongoing economic crisis.
According to a report by CoinDesk, the demand for digital currencies pegged to gold is increasing alongside its physical counterpart. Both PAXG and XAUT are backed by one ounce of gold stored in an institutional vault. Investors are entitled to redeem the physical gold in exchange for the blockchain-based token.
Roy Sebag, founder of metals custodian Goldmoney, explained the demand for gold in a phone interview on Tuesday,
The Fed completely changed the rules – the real rate of interest swung even more and so we are seeing all that money flow into gold immediately.
PAXG purchases have more than doubled day-over-day since the beginning fo the week, with Paxos Spokesperson Becky McClain claiming the platform had enough physical gold to cover current volumes.
Demand for XAUT also increased, driving the stablecoin’s market cap to $50 million on Mar. 25 despite concerns over supply-chain issues in sourcing the gold.
Tether said in a statement,
We have seen strong growth for XAUT and we anticipate XAUT will continue to grow as it establishes itself as the dominant digital token representing gold ownership.
A report by MarketWatch on Mar. 26 claimed the uptick in demand for physical gold has also skyrocketed, with traditional suppliers facing shortages in getting the physical bullion to market.
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