$1.5B Invested in Tokenized Gold – Are Investors Turning Away from Bitcoin?

Gold is gaining traction, as evidenced by the growing supply of tokenized gold, which reflects a shift among investors seeking safety. Meanwhile, Bitcoin is finding it challenging to keep up. Are investors temporarily favoring gold, or are they moving away from cryptocurrency entirely?

Key Takeaways

The supply of tokenized gold has significantly increased, reaching approximately $1.5 billion, as investors turn to safer assets.
While gold's price rises, Bitcoin is lagging, raising questions about whether capital is leaving crypto markets.
Bitcoin's value compared to gold has declined, but this could indicate a relative rather than absolute weakness.
Analysts suggest Bitcoin may be undervalued in the current environment compared to gold.

Tokenized Gold

The Shift to Safer Assets

The increase in tokenized gold supply accompanies a surge in gold prices, according to recent information from Token Terminal. Paxos-issued PAXG now boasts an outstanding supply of about $1.5 billion, a notable increase compared to much of 2023 and early 2024.

Bitcoin Gold Ratio

Investors are not only accessing gold through exchange-traded funds (ETFs) or physical gold bars, but also opting for blockchain versions. The appeal of tokenized gold lies in its accessibility, quicker settlement processes, and 24/7 trading capabilities, especially during uncertain times.

Comparing Gold and Bitcoin: Price Performances and Valuations

As gold prices soar, Bitcoin [BTC] is showing sluggish momentum. This raises the question: Is Bitcoin's underperformance due to capital exiting the crypto space, or are investors simply opting for safer assets for the time being?

Currently, the Bitcoin-to-gold ratio has dropped to levels typically associated with market lows. In prior cycles, similar decreases in this ratio often preceded strong rebounds in Bitcoin's value, even during times of lower gold demand. This suggests that Bitcoin's weakness may be more about relative comparisons rather than an absolute decline. Crypto analyst Michael Van de Poppe pointed out that the situation today mirrors past market bottoms. "One of them is getting overvalued. One of them is getting undervalued. In my opinion, gold is overvalued, whereas Bitcoin is undervalued."

Bitcoin

In contrast, Bitcoin supporter Matthew Kratter emphasizes a long-term perspective, noting that gold supplies have historically increased at a rate of 1-2% per year for many decades, which makes it costly to transport and store significant amounts of gold — rendering it inefficient for settling trade imbalances.

The Ongoing Contest: Gold vs. Bitcoin

At this time, gold seems to dominate the safety trade landscape, with robust prices and a selective risk appetite among investors. However, Bitcoin advocates contend that the narrative of Bitcoin as a store of value remains relevant, albeit on different timelines.

The critical question now is whether this trend represents a fundamental shift in investor behavior or merely a temporary phase. Ultimately, it hinges on how investors will define safety in today’s digital financial ecosystem.

Conclusion

As the landscape of investment continues to evolve, the dynamics between traditional assets like gold and digital currencies like Bitcoin will remain a pivotal discussion. Understanding these trends is key for both new and seasoned investors navigating this complex market.