- Tokenised gold is gaining popularity.
- It comes as the yellow metal's price soars past $4,000.
- Investors are flocking to perceived stores of value like gold and Bitcoin as part of the so-called debasement trade.
Crypto investors are turning to tokenised versions of gold as the asset’s price breaks past $4,000, putting in its best year-to-date performance in over 45 years.
Tokenised gold refers to blockchain-based tokens that represent ownership of physical gold. There’s more than $3 billion worth of tokenised gold in circulation, according to CoinGecko data.
Since the start of the year, the number of crypto wallets holding tokenised gold has jumped 53%, according to data from rwa.xyz.
At the same time, the amount of tokenised gold in circulation is exploding. The supply of Tether Gold, the market leader, has swelled 52% since January, while Paxos Gold, the second biggest, is up 50%.
The debasement trade
The increased interest in blockchain-based gold receipts comes as the asset soars 54% since the start of the year, outperforming Bitcoin, which has gained 31% in the same period.
“Gold is on track for its strongest annual performance since 1979,” Tom Bailey, head of research at HANetf, an exchange-traded fund issuer, said in a note shared with DL News. “Mounting fiscal strains across developed economies are raising questions about long-term debt sustainability.”
Bailey is referring to the value erosion of fiat currencies like the US dollar, caused by government policies that spur excessive money printing, increases to deficits, and above-target inflation.
Investors are flocking to gold and Bitcoin, which are perceived as reliable stores of value, to protect against this erosion, often dubbed the “debasement trade.”
The trade was given an additional boost this week by the election of Sanae Takaichi as Japan’s new Prime Minister.
She advocates for more public spending and tax cuts — policies that are seen as bad for the Japanese yen, and could further push investors towards gold and Bitcoin.
Record-breaking rise
Gold’s record-breaking rise is encouraging both traditional and crypto investors to re-evaluate the asset through a modern lens, according to Timo Lehes, co-founder of Swarm, a tokenisation platform.
“Every new all-time high brings renewed interest to an asset and gold’s breakout is no exception,” he told DL News. “We’re seeing clear momentum toward real-world assets becoming a backbone of onchain finance.”
One of the main advantages of tokenised gold is that holders can use it in decentralised finance applications on blockchains like Ethereum.
“In tokenised form, gold becomes an active asset, allowing individuals to lend, borrow, and build long-term wealth without the need for a fiat currency,” Kevin Rusher, founder of RAAC, a real-world asset platform, said in a statement shared with DL News.
While tokenised gold is benefitting, it’s still small compared to more popular ways for investors to gain exposure to the yellow metal.
Gold exchange-traded funds hold $461 billion worth of the asset, and have registered record inflows of $64 billion this year, according to data from the World Gold Council.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.