Gold Out Performs Bitcoin

Welcome back to the Tribe! In this post we dive into Gold Out Performs Bitcoin – is this a bear signal or just another step in Bitcoin’s path?

Nothing should be considered investment or financial advice. Enjoy the ride!

Gold Out Performs Bitcoin

As crypto markets continue to dip, gold-backed stablecoins have enjoyed increased demand and trading volume. A recent report says this surge has occurred partly due to ongoing conflicts between Ukraine and Russia.

Geopolitical Uncertainty Between Russia and Ukraine causes Uptick in Gold-backed Stablecoin Volumes

Digital asset data provider Kaiko published a report saying increased tension between Russia and Ukraine as well rising inflation concerns in jurisdictions like the U.S has caused an uptick in the trading volume of gold-backed stablecoins like Tether Gold (XAUT) and PAX Gold (PAXG).

According to the report released On Monday (February 21, 2022), geopolitical uncertainty in certain regions has contributed to the ongoing decline in crypto market prices. Also, plans from the feds to implement significantly higher interest rates to manage the highest inflation numbers in 40 years has contributed to growing concerns in the liquidity market.

Investors looking to manage their risk are now gradually turning to less volatile options – Stablecoins. These are digital coins pegged to a fiat currency or securities. By using physical assets like gold or American Dollar as collateral, stablecoins often achieve a level of stabilization in terms of their market value or price.

Data from the report shows that stablecoins pegged to gold have become increasingly popular since around September 2021. Two major stablecoins by market cap, PAX Gold (PAXG) and Tether Gold (XAUT) experienced growth in their respective trading volumes on centralized exchanges.

Gold Backed Stablecoins

PAX Gold in particular nearly doubled in trading numbers. Demand for gold itself has also grown as investors look to hedge their funds against a possible market crash. Also, since the start of February 2022, gold has increased in value by 5%. The asset subsequently hit a multi-month high.

The general stablecoin market has also established itself as an alternative safe haven for investors and a useful tool for blockchain-powered firms developing web3 solutions. An excerpt from the report reads:

“The stablecoin market has grown significantly since 2020 in large part due to their growing use in decentralized finance applications, as margin for derivatives and as the denominating currency for centralized spot markets.”

Cryptocurrency Markets Dipping

Cryptocurrencies on the other hand have been in a downtrend since November 2021. Bitcoin (BTC) has fallen more than 30% from its all-time high of $68,000. As of the time of writing this report, the worlds leading crypto is currently trading around $38,000. Other leading virtual currencies like Ethereum (ETH), Binance coin (BNB) and Luna have also dipped from their previous highs.

In addition, the Bitcoin-to-gold ratio recently declined to its lowest point since mid-2021. With market sentiment predominantly negative at the time, and the Russia-Ukraine situation escalating, it remains unclear whether the crypto market will experience a trend reversal in the coming week and recover.

Unrelated news: IMF Warns Nigerian Central Bank about CBDC Risks

In other news, the International Monetary Fund (IMF) has called for caution when using central bank digital currencies (CBDC) as a cross-border payment method. The IMF warned the Central Bank of Nigeria (CBN) to tighten its anti-money laundering checks and improve cybersecurity.

The IMF also suggested that Nigeria’s apex bank implement in-depth risk analysis before deploying the eNaira for international remittance.

CBDCs were all the rage in 2020 and 2021 as sovereign governments pushed hard to keep up with the rising trend of crypto adoption. Countries like China have since launched digital versions of their national fiat currencies.