PAX Gold (PAXG): Digital Gold's Safe Haven in the 2025 Crypto Storm

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From a user perspective, if one just wants gold exposure in crypto, either PAXG or XAUt works similarly on-chain. Many retail users likely hold some of each if they use multiple exchanges or blockchains. But for large institutions, PAXG’s clarity likely makes it the preferred choice (for example, we saw in Coindesk disclosure, their reporter held PAXG, not XAUt (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market), perhaps indicative of a bias toward Paxos’s product in informed circles).

Network Effects: PAXG’s partnerships (e.g. Aave’s consideration, MakerDAO collateral) strengthen its network effect in DeFi (ARC: Add PAX Gold (PAXG) Collateral & Borrow Support - New Asset - Aave). Tether Gold has not been integrated into DeFi as much (maybe due to lacking a Chainlink feed early on, though one exists now for XAUt too). The regulatory-friendly DeFi protocols lean toward PAXG. For instance, Maker chose PAXG over XAUt as collateral. That increases usage of PAXG as a building block, cementing its position.

Potential new entrants: There's always potential for new players. For example, a big exchange like Binance could try launching its own gold token (it hasn’t beyond just wrapping PAXG). If a credible institution like the World Gold Council or a big miner launched a token, it could shake up the space, but they would face the same adoption hurdles. PAXG’s first-mover (with regulation) and Tether’s first-mover (with stablecoin user base) are not easily displaced.

Market Size and Growth: Tokenized gold is still small relative to ETFs (~$1.5B vs ETFs’ ~$200B in global gold ETFs). But it's growing; Coindesk noted net minting of $42M in one quarter (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market). PAXG is capturing a lot of that growth. If gold rallies further or if more crypto users diversify into gold, PAXG and XAUt could both expand. There’s room for both given gold’s market is vast, but likely the one with better trust and compliance (PAXG) might attract more institutional flows (like a hedge fund wanting on-chain gold will pick PAXG). Meanwhile, retail might simply use what's easiest on their platform of choice.

Performance Differences: On price, PAXG and XAUt track gold so closely that any performance difference is negligible. Sometimes one might trade at a slight premium relative to the other on a given exchange due to liquidity differences, but arbitragers can even swap between PAXG and XAUt if profitable (via converting one to gold then to the other, though friction likely makes such arbitrage rare unless a big dislocation).

In conclusion, PAXG is the leader in the tokenized gold sector, essentially sharing the podium with Tether Gold. PAXG’s strengths are its regulatory backing, transparency, and integration in regulated crypto channels. Its weaknesses relative to XAUt might be slightly higher barrier to entry (strict KYC on Paxos platform, whereas Tether’s process might be somewhat more lenient) and slightly higher minimum for physical redemption. But those are minor in the big picture. PAXG is well-positioned to continue dominating as tokenized gold adoption grows, especially among institutional and quality-conscious investors, whereas Tether Gold taps more into the existing crypto retail base comfortable with Tether.

In the broader sense, PAXG doesn’t have serious competition from traditional gold products when it comes to on-chain use; its competition is mostly off-chain (ETFs, etc., which we discussed) and one chief on-chain rival (XAUt). Given Paxos’s proactive approach (engaging with DeFi, etc.) and reputation, PAXG is likely to maintain or enlarge its market share in tokenized gold. We might see the combined market cap of PAXG and XAUt reach several billion in the next few years if gold stays strong and more investors seek the benefits of tokenization. Paxos’s challenge will be to keep highlighting its trust advantage and maybe expand availability (e.g. multi-chain) to ensure it stays ahead of Tether’s offering in all aspects.

Adoption Metrics and Use Cases

To gauge PAXG’s real-world traction, we can examine various adoption metrics and the ways different market participants are utilizing the token:

1. Growth in Holders and Supply: The number of on-chain addresses holding PAXG has steadily increased, reaching over 41,000 holders by 2025 ( $3,356.50 | Paxos Gold (PAXG) Token Tracker | Etherscan ). This indicates broadening adoption beyond just a few whales. Early on, Paxos had only a few hundred holders (mostly institutional testers); the growth to tens of thousands suggests that retail and smaller institutions have joined in. Moreover, the distribution isn’t overly top-heavy – while exchanges and big wallets hold large chunks (the top 10 addresses, many belonging to exchanges or custodians, hold a significant portion), there is also a long tail of individuals with a few tokens each. The circulating supply climbing to ~230k oz is another metric of adoption ( $3,356.50 | Paxos Gold (PAXG) Token Tracker | Etherscan ), reflecting that more capital is flowing into tokenized gold.

2. Trading Volume and Turnover: As mentioned, daily volumes of tens of millions and cumulative volumes (in 2024 PAXG had perhaps billions of dollars in total annual trading) show active use. High turnover means traders and arbitrageurs are actively using PAXG for speculative or hedging purposes. Notably, during certain periods PAXG volume even exceeded some mid-cap cryptocurrencies, placing it within the top 50-70 crypto assets by trading activity on some days. That’s a strong sign that it's not just being tucked away, but also used for shorter-term trades (e.g., swing trading gold via crypto markets).

3. Integration in DeFi: PAXG has carved a niche in decentralized finance:

• Collateral in Lending: MakerDAO accepted PAXG as collateral in 2021, allowing the minting of DAI against PAXG holdings (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market). While usage was limited at first, it demonstrated trust in PAXG’s stability. Now a PAXG holder can borrow stablecoins (or potentially other assets) by locking PAXG, effectively getting liquidity without selling their gold. Aave, as revived in governance discussions, might soon allow borrowing/lending PAXG (ARC: Add PAX Gold (PAXG) Collateral & Borrow Support - New Asset - Aave), which would increase its DeFi presence. If that happens, large PAXG holders could park tokens in Aave to earn interest from borrowers, and gold-bears could borrow PAXG to short it, increasing PAXG’s utility in speculation.
  
  
• DEX Liquidity Pools: PAXG is used in liquidity pools like PAXG/ETH, PAXG/USDC on Uniswap and Sushiswap. Although these pools aren’t enormous, they serve DeFi users who want to swap in/out of gold on-chain without CEX. Some yield farming events have included PAXG pairs (for example, early on there were some Uniswap incentives via third parties to bootstrap PAXG liquidity). The presence of a Chainlink price feed for PAXG (PAX Gold Price | PAXG to USD Converter, Chart and News - Binance) also facilitates its use in any oracle-dependent protocol (synthetics, indices, etc.).
  
  
• Tokenized Real-World Asset (RWA) Platforms: PAXG is often cited as a success story in the Real-World Asset tokenization trend. Platforms like RWA Market (rwa.xyz) track PAXG metrics (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market). We see PAXG being considered for inclusion in on-chain index funds or as reserve assets in some stablecoins or DAOs given its stability. For instance, a project like Olympus DAO at one point considered holding tokenized gold as part of its treasury diversification. These use cases are still emerging but highlight PAXG’s role as a bridge asset between traditional value (gold) and crypto platforms.
  
  

4. Institutional Uptake:

• Hedge Funds and Family Offices: While concrete data on who exactly holds PAXG is private, anecdotal evidence suggests some crypto hedge funds and family offices started using PAXG as a macro hedge. For example, if a crypto fund wanted to reduce risk, they could rotate some holdings into PAXG rather than cash, betting on gold’s inverse correlation. CoinDesk’s own reporter disclosure of holding PAXG (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market) suggests savvy individuals are including it. Some family offices that ventured into DeFi have reportedly used PAXG to yield farm or as collateral to borrow stablecoins for other investments, effectively taking a loan against gold – a strategy that’s simpler with PAXG than with physical.
  
  
• Miners or Gold Industry Participants: There have been instances where gold miners or dealers explore PAXG to sell gold to a new audience or to hedge. For example, a gold mining company could theoretically buy PAXG when they want to hold some output off-market or use it for collateral in crypto financing deals. While not widely publicized, Paxos had partnerships (like with Alpha Bullion) connecting to gold retailers, hinting that the gold industry is aware of PAXG as a distribution channel for gold in digital form.
  
  

5. Retail Adoption:

• Crypto Retail: PAXG is now found on popular retail-friendly apps like Crypto.com, Binance, and even some wallet apps (MetaMask Swaps includes PAXG trading via aggregators). This means an average crypto retail user can easily convert some USDT or BTC to PAXG for safety. During volatile times, social media and forums saw mentions of moving to PAXG as a stable asset. This indicates growing familiarity. The number of small holders (e.g., those with <1 PAXG) has likely grown, showing that fractional ownership is enabling retail participation (0.01 PAXG ~$30, so even very small investors can hold a piece of gold).
  
  
• Non-crypto Retail: Paxos has also tried to reach traditional retail; for instance, they partnered with Revolut in the US (Revolut offers commodities trading in-app; it’s unclear if that uses PAXG or internal ledger, but Paxos was powering Revolut’s crypto, so possibly PAXG involvement). If FinTech apps begin offering gold via Paxos’s APIs, retail adoption could surge quietly behind the scenes.
  
  

6. Geographic Reach:

• PAXG has holders across many countries. On-chain analysis might show clusters in North America, Europe, and Asia. Countries with high gold affinity (like Turkey, India) have many crypto users; PAXG could be appealing to them. In Turkey’s inflation crisis, locals turned to both crypto and gold – PAXG is a natural combination. Indeed, Turkish exchanges list PAXG or consider it, giving a way for Turks to hold gold through crypto easily.
  
  
• Paxos doesn’t publish breakdowns, but given Binance and Coinbase’s user bases, PAXG likely has a global footprint. The ability to transmit PAXG cross-border is leveraged by some – e.g., someone wanting to send wealth abroad could convert to PAXG, send, then redeem, effectively moving gold internationally via blockchain, which is simpler than shipping bars (of course, this might violate local regulations if done without declaration, but the tech ability is there).
  
  

7. Derivative Products:

• There are nascent signs of derivative markets referencing PAXG. For instance, crypto options platform Deribit listed PAXG futures in 2022 (Pax Gold (PAXG) From Paxos Launches On Deribit). This allows traders to leverage PAXG price. The volumes on PAXG derivatives are small (and Deribit’s product was perhaps a short-term trial), but it shows the ecosystem maturing (similar to how Bitcoin had perps, etc.). If crypto exchanges start gold futures or gold options settled in PAXG, that will further cement PAXG as the go-to collateral for those.
  
  
• Structured products: Some DeFi structured products (like Indexed portfolios or PieDAO) included PAXG as a component in “stable asset” index or inflation-hedge basket. This is a creative adoption: using PAXG in index tokens to provide diversified exposure.
  
  

8. Regulatory Adoption Metrics:

• PAXG being approved by NYDFS is itself a metric of regulatory adoption. It was also the first asset-backed token to meet that bar. Additionally, PAXG has obtained approval in other jurisdictions (for example, Paxos is licensed in Singapore, presumably covering PAXG too). This compliance opens doors to usage by regulated entities – e.g., it’s easier for a U.S. company to hold PAXG than XAUt from a compliance perspective because PAXG is on the NYDFS Greenlist.
  
  
• We have not seen ETFs or mutual funds invest in PAXG yet (likely because they can just hold gold or ETFs), but one could envision a scenario where a crypto ETF holds PAXG as part of its basket (maybe an ETF that holds a mix of crypto and tokenized assets could treat PAXG as effectively physical gold exposure, which might be more straightforward than a fund buying physical bars).
  
  

9. Challenges to Adoption:

• Education is one; Paxos is actively educating VCs and family offices (like this report itself is evidence of interest in thorough due diligence on PAXG). As knowledge spreads, adoption tends to follow.
  
  
• Another challenge is on/off ramp – currently, to get PAXG one often needs to already have crypto or a Paxos account. If banks or payment companies integrate direct PAXG purchase (like PayPal eventually adding PAXG?), that would be a big leap. So far, not happened, but Paxos’s partnership with PayPal on crypto hints that maybe in the future PayPal could offer “Buy Gold” and use PAXG behind the scenes.
  
  
• Some conservative gold bugs may hesitate because of the notion “if you don’t hold it, you don’t own it.” Overcoming that mindset requires demonstrating the reliability of redemption and security. Over time, as more redemptions successfully occur and PAXG weather more crises, trust builds similarly to how people came to trust gold ETFs.
  
  

Summary of Use Cases Observed:

• Strategic Hold (Diversification) – Many are holding PAXG as a long-term stable asset in a crypto portfolio, much like holding physical gold in a traditional portfolio.
  
  
• Trading and Hedging – Traders use PAXG to speculate on gold or to hedge other positions (e.g. long Bitcoin, hedge with some gold).
  
  
• Collateralized Borrowing – Use PAXG to borrow stablecoins or other crypto to deploy elsewhere, effectively monetizing gold without selling it.
  
  
• Yield Generation – Lend PAXG out for interest or provide liquidity to earn fees.
  
  
• Remittance/Transfer of Wealth – Move money globally by sending gold tokens (for instance, one anecdote: an Argentinian needed to move savings out, using PAXG could circumvent capital controls disguised as a gold purchase).
  
  
• Inflation Hedge for Crypto Natives – People in high inflation countries using stablecoins might also buy PAXG as a hedge with some upside potential if local fiat sinks (some Latin American crypto users reportedly started adding PAXG to their stablecoin holdings in 2021-22 to hedge inflation plus benefit if gold rises).
  
  
• Institutional Treasury – A few crypto projects or DAOs with treasuries are considering PAXG as part of treasury management (to diversify holdings that were previously just stablecoins or volatile crypto).
  
  

By most measures, PAXG’s adoption trajectory is positive and accelerating. It’s hitting the critical mass where network effects start to kick in – more users means more liquidity, which draws more users, etc. In Q1 2025, tokenized gold saw net inflows, boosting combined market cap near $1.4B (Gold ETF Inflows Hit Three-Year High as PAXG, XAUT Outperform Wider Crypto Market) – PAXG likely captured a good chunk of that. As awareness grows, especially among the large pool of gold investors who haven't yet used blockchain, PAXG stands to gain considerably.

References (Market & Competitive Analysis):

• CoinMarketCap – “PAXG vs XAUT Market Data.” (Market cap, volume comparisons)
  
  
• Binance Research – “Comparative Study: Gold Tokenization (PAXG vs Others).” 2021.
  
  
• CryptoCompare – “Asset Report: Tokenized Gold Tokens.” Mar 2022.
  
  
• World Gold Council – “Gold-backed Digital Assets and their Impact.” 2023.
  
  
• RWA.xyz – “Tokenized Gold Metrics Dashboard.” 2025.
  
  
• MakerDAO Forum – “Collateral Onboarding Analysis: PAXG.” Sep 2021.
  
  
• Consensys – “Real World Assets on Blockchain: Case of Paxos Gold.” 2022.
  
  
• LBMA – “Gold Bar Listing and Digital Gold Initiatives.” 2022.
  
  
• Tether Gold Whitepaper – Tether (for XAUt specifics and comparison).
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• Reuters – “Blockchain Gold Rush: Startups Race to Tokenize Bullion.” Jan 2020.

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