Over the weekend, the conflict between Israel and Iran dealt a heavy blow to the cryptocurrency market, with the resulting volatility causing liquidations of nearly $2 billion. Meanwhile, Paxos Gold (PAXG), the second-largest stablecoin by market capitalization, performed exceptionally well, experiencing a price surge of 40% in a single day, reaching a new high. The contrasting trends between Bitcoin and PAXG have sparked a reassessment of Bitcoin’s ability as a safe-haven asset.
In the face of the conflict between Israel and Iran, the cryptocurrency market suffered a significant downturn, with Bitcoin plummeting to $60,000 at one point, experiencing a drop of over 10% within half an hour. Other altcoins also experienced larger pullbacks, resulting in a total of nearly $2 billion in liquidations over the past two days.
Amidst this backdrop, Paxos Gold (PAXG), the second-largest stablecoin by market capitalization, emerged as a rising force. It reached a new high that synchronized with the traditional gold market, highlighting its effectiveness as a hedge asset.
Data from Binance Market shows that PAXG reached a historical high of $3,295 around 4:00 am on the 14th, with a maximum daily increase of nearly 40%. This price represents a premium of over 40% compared to the spot price of gold at $2,342.90 at the close on Friday.
As the conflict has not escalated further at present, PAXG has retreated to $2,366 as of the time of writing, experiencing a 1.58% decline in the past 24 hours and gradually aligning with the spot price of gold.
Paxos spokesperson pointed out that geopolitical events may affect the price of gold, but accurately determining the price of gold at any given moment is neither simple nor straightforward. They further explained that the opposite trends between Bitcoin and PAXG have sparked extensive discussions within the community, with many netizens arguing that “Bitcoin is not a hedge asset” and “believers should rethink what kind of asset Bitcoin is in the face of war risks.”
Bob Elliot, former executive at Bridgewater Associates, stated that Bitcoin may be many things, but it is not a geopolitical hedge tool.
However, Phyrex reminds that when discussing whether Bitcoin is a hedge asset or a risk asset, it should be discussed separately for “high-net-worth investors” and “ordinary investors.” For high-net-worth investors, Bitcoin is indeed a hedge asset, but it hedges against counterparty risks rather than depreciation risks. For them, considerations often revolve around portability, ease of settlement, and even the “cross” aspect of avoiding scrutiny, which is the fundamental reason. In addition, according to Phyrex’s statistics on Bitcoin holdings on the 14th, although high-net-worth investors’ holdings have fluctuated, they continue to accumulate Bitcoin overall.
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