Analog Bitcoin is smashing all-time highs and stealing the spotlight from crypto. Yes, gold has broken $3,000 per ounce while risk assets dump amid tariff turmoil and rumors of recession. So, this has new investors wondering about their options for allocating to gold. But many will be in for a nasty surprise when they find out what a logistical nightmare of an investment it is. And sure, there are ETFs, but then you’re paying middlemen to hold a bag of paper gold for you. The solution, tokenized gold. Today, we break down what it is, how it works, which projects are leading the market, and why. My name is Guy. Stay tuned. Markets are on shaky ground at the moment. After a euphoric presidential transition period that saw the DXY rally 10%, the S&P 500 up 7.6, 6% and BTC up 64%. The bullish Trump narrative imploded upon contact with reality. The first few weeks of the second Trump administration have seen the DXY down 7% and the S&P 500 tank 11% both to pre-election levels and BTC plummet 43%. In other words, extreme fear is driving the market and investors are abandoning risk assets in droves. And that can only mean one thing. Gold is rallying like crazy. At the time of making this video, it’s up almost 12% in just 2 months. Now, whether we’re at the beginning, in the middle, or towards the end of a riskoff period is a discussion for another video. But as long as these conditions persist, investors will be looking to allocate to gold. But for those of us living and breathing crypto, gold can feel a bit distant. Normally, the only metal we need is in our hardware wallets. Actually, buying physical gold seems a bit medieval. What am I supposed to do? Pull up to Fort Knox with a wheelbarrow and a wad of cash? Well, perhaps not. You’ll probably go through a dealer or perhaps a bank. Now, if you buy a small amount, you might have to buy coins rather than bars. And for coins, you’ll typically pay a premium of 5 to 10% over the spot price of gold. Meanwhile, if you opt for bars of gold, the specific quantity you can buy or sell at any given time is limited by this unit size. For retail investors, smaller bars typically range from just an ounce to a kilogram, meaning that the smallest common unit is about $3,000 at the time of making this video. Now, this is not practical for smaller investors who may only want to buy or sell a few hundred worth of gold at a time. If you’re buying a larger amount, then you’re going to have to take into account the costs of fing around and transferring ownership of physical gold. Of course, when it comes to selling, you’ll also need a dealer or other buyer who wants to buy from you, which could take some time, and you may end up selling at a discounted price. And what about custody? Keeping a bar of gold under the mattress is going to make for a very uncomfortable night’s sleep. You could buy a safe, but let’s face it, your gold is probably going to be safer in a dedicated vault somewhere. But of course, if you want to pay for a spot in a vault, it’s going to push up the cost basis of your investment over time. And then there are insurance costs, too. So, who knew that buying a bit of metal could be such a pain? If you have a small portfolio to start with, all of this could make investing in physical gold cumbersome, if not prohibitively expensive. And you know what? If you’re not even going to custody your own gold, maybe ETFs are a better option. They are far more convenient as you’re not buying metal, but instead paper gold shares representing some quantity of a stash of physical gold owned by the ETF issuers like Black Rockck, Van, Fidelity, and so on. Depending on the issuer and your broker, you may even be able to buy and sell fractional shares for as low as $1. Now, gold ETF shares closely track the price of gold, so you’ll get all the price exposure you want, but without having to pay any transport or storage fees. However, you’ll only be able to buy and sell during Tradfi trading hours, and you’ll still be paying fees to a bunch of middlemen standing between you and the gold that is nominally yours. And in case you hadn’t noticed, we’re not exactly huge fans of trusting companies to custody our assets on our behalf. So, if only there was some easy way to instantly buy custody and sell gold in any quantity 24/7365. Is that too much to ask? All right, I know I gave it away in the intro. Yes, tokenized gold is one of the earliest and most enduring success stories of realworld assets being brought onto blockchains. It gives us a new way to invest that combines the convenience of ETFs with the direct ownership that comes with buying physical gold. It does away with the reliance on tradfi middlemen and their trading hours and the logistics associated with holding gold physically. Like gold ETFs, you can buy tokenized gold in almost any quantity from fractions of an ounce to millions of dollars worth. You can buy and sell instantly on centralized and decentralized crypto exchanges whenever and wherever you want. Meanwhile, your only custody concern will be which wallet to keep your tokenized gold holdings in. Of course, the best wallet for your tokenized gold is a hardware wallet. And if you don’t yet have one, you’re in luck because the Coin Bureau deals page has exclusive offers on the best hardware wallets on the market, which you can find linked to down below. Anyway, another benefit of tokenized gold over gold ETFs is that you don’t need to pay a stock broker to hold your hand and buy, sell, and custody your gold ETF shares for you. Now, I know what you’re thinking. But guy, what about Robin Hood? There’s already an app where I can buy $2 worth of a gold ETF from the toilet at work. Why do I need crypto gold? It’s a good question. Apps like Robin Hood have indeed democratized access to US securities, including gold ETFs. You can buy fractional shares of gold ETFs without paying commission fees nor maintaining a minimum account balance. However, users of apps like Robin Hood are still limited by Tradfy trading hours. You can place orders whenever you want, but they’ll be waiting in line until the market opens on the next trading day. And what if you want to buy shares of a gold ETF and send them to someone else? Well, it’ll cost you $100 for the transfer. Okay. Well, what about custody? Surely you’re holding and in control of your own assets. Well, that would be nice, but gold ETF shares are securities. In most countries, securities market infrastructure is designed around broker intermediation. Direct ownership is legal, but generally impractical. Apps like Robin Hood may have streamlined access to securities, but it’s still the same old dinosaur market. you’re still reliant on them as your broker to buy, sell, and hold your bag on your behalf. And just how reliable are they anyway? If something bad happens to your broker or if the government decides they want to censor you for whatever reason, you could lose access to your assets very easily. Alternatively, if the market gets too volatile, brokers like Robin Hood can unilaterally restrict trading. This was the crux of the memetock controversy of January 2021 when droves of Redditors flocked to Robin Hood only to be denied access by the platform apparently due to liquidity demands from clearing houses. This exposed a critical flaw in trady market infrastructure as centralized intermediaries created bottlenecks and shut out retail investors. And this is in large part why we have crypto in the first place. Yes, I know we have similar bottlenecks in the form of centralized exchanges, but we also have a universe of permissionless decentralized blockchains where it’s much more difficult for anyone to come between you and your assets. So, although you may be able to download an app and buy gold ETFs as easily as you can crypto nowadays, the similarities end there. Now, to better understand tokenized gold, let’s take a look at the pioneer of the genre, Paxos. Founded in 2012, Paxos is a trust company and custodian regulated by the New York State Department of Financial Services. It’s the issuer of Pax G, a fully collateralized goldbacked token on the Ethereum blockchain. Importantly, the physical gold backing Pax G is fully allocated. This means that Pax G is not merely an IOU from Paxos. Each token corresponds to one fine troy ounce of gold held by Paxos Trust Company in the vaults of the London Bullion Market Association or LBMA. To be precise, we’re talking about investment grade London good delivery gold bars, which typically weigh between 385 and 415 fine troy ounces. For reference, the spot market value of 400 fine troy ounces of gold is about $1.2 2 million at the time of making this video. So, if you do want to redeem your Pax G tokens for the physical gold they represent, you can do so on Paxos’s website, but the minimum is one whole bar. Paxos requires you to have at least 430 PAX G tokens to ensure that your holdings are enough to cover any given bar in the vaults, accounting for weight discrepancies within the usual range. Now, according to Paxos, it is possible to convert smaller quantities of Pax G to physical gold through a network of participating gold retailers around the world. Although, it’s not clear if this will be the same LBMA accredited London good delivery gold that Pax G tokens directly represent. Anyway, just bear in mind that Paxos is not going to be slicing up gold bars in the London vaults for fractional redemptions. However, back on chain, a single PAXG token can be divided into units of up to 18 decimal points, making it easy to buy and sell minuscule amounts of investment grade gold. And as an ERC20 token, PAXG can be stored in any EVM compatible crypto wallet, and you can, for example, split your Paxos gold holdings between multiple different wallet addresses for maximum security. Now, if you’re not sure you can trust Paxos’s claims about the gold backing Pax G, then you may be pleased to learn that Paxos publishes monthly attestations issued by a third-party auditing firm. Now, until recently, this firm was Smith and Brown PC, the 25th largest accounting firm in North America. But this year, Paxos switched to KPMG, one of the world’s top four audit firms for its attistations. KPMG’s first report dated the 31st of January 2025 is now available on Paxos’s website. It attests that Paxos is custodying 22,381 fine troy ounces of gold or one fine troy ounce for each of the 22,381 redeemable Pax G tokens outstanding. And because Pax G is a onetoone representation of physical gold, it’s pegged to the spot price of gold is pretty robust. A look at Trading View shows us that PAXG has never depegged for a significant amount of time. Although there are a few sharp wicks on the chart that likely result from exchange liquidity crunches or market manipulation, possibly both. For example, on the 13th of April last year, Paxg shot up to almost $3,300 on Binance when the spot price of gold was around $2,342. This happened after Iran retaliated against Israel for blowing up its embassy in Syria earlier that month. Upon closer inspection, we can see that Pax G returned to its peg within about 2 hours. In this case, the freakish spike tells us more about the fragility of crypto exchange liquidity than Paxos or Paxg per se. So unless you’re a nervous whale just waiting to force a huge market order at the first sign of bad news, we don’t think that DEG is a major cause for concern with PAXG. Nonetheless, it is good to bear in mind that tokenized gold is not immune from crypto market quirks like this. And although tokenized gold can be bought and sold very quickly and easily on the secondary market, when it comes to market depth, it can’t compare to tradi gold markets. So if you want to buy a very large amount of tokenized gold without making a splash on the public market for that token, you’re best off buying directly from an issuer like Paxos rather than on a crypto exchange. The issuer will typically charge a fee, but this may be a smaller price to pay than you would end up paying on a thin exchange order book. Anyway, we’ve heard a lot about PAX G, and for good reason. It was the first serious and successful attempt to tokenize investment grade gold at scale. However, it’s not the only tokenized gold worth your attention. It’s almost the only one, but not quite. Coin Gecko has, in fact, 17 cryptos listed under the tokenized gold category. Collectively, they have a market cap of $1.88 billion at the time of making this video. Interestingly though, it was three years ago that the collective market cap of tokenized gold cryptos broke the $1 billion mark. Considering that the spot price of gold has appreciated by around 50% since 2022, the size of the tokenized gold market has not really grown that much in the last 3 years. Now, this may be because of the bullish market conditions that made BTC’s returns much more attractive than golds in 2023 and 2024. In any case, of these 17 cryptos, 12 are showing 24-hour trading volumes of 5 figures or less, and only four are pegged to the spot price of gold, suggesting that the other cryptos here are not the same kind of tokenized gold that we’re talking about today. Now, this group of four is dominated by Pax G and its main rival X AUT. The latter is issued by none other than Tether, who launched their tokenized gold in early 2020, just months after PAXG hit the market. We can see from this graph that XAT and PAXG have been locked in fierce competition since about 2021 when Coin Gecko’s data for PAXG begins. After briefly leading in 2021, XAT fell behind Pax G for about 2 years. Then in October 2023, Tether flipped Paxos and it’s maintained its lead ever since. It’s a narrow lead, but it looks more robust than in the past when Pax G and X aut repeatedly drew neck andneck. At the time of making this video, the market cap of X Aut is about $750 million, while for PAXG, it’s about $650 million. And also visible here is the appearance of a third contender listed on Coin Gecko in August 2024. This crypto, which I won’t name, has a market cap creeping past $250 million, but it has no significant exchange listings and low trading volume. Now, normally we wouldn’t discuss a token of this size, but I have to give a special mention to the innovative collateralization mechanism that we found here. The project’s website explains that each token represents 1 ounce of gold held in uh the ground. Yes, you did hear me correctly. They say the tokens are backed by physical gold. It just happens to be gold that nobody has physically dug up yet. Safe in the custody of mother nature. Metal detector. not included with your purchase. Anyway, back above ground, this makes Tether Paxos’s only serious competition. So, let’s take a closer look at XAT. Like Paxg, Tether says each XAT token is backed by one fine troy ounce of a specific gold bar. These are allocated gold bars of the same LBMA London good delivery standard held by Paxos. And also like PAXG, you can look up the specific gold bar that is allocated to your wallet address on the official website for Tether Gold. However, Tether falls short when it comes to transparency about where exactly your gold is held. Its website claims that the gold is held by a custodian in a vault in Switzerland. I’d love to offer more detail, but well, that’s as specific as it gets. Who is the custodian of your gold? We can’t say. Where in Switzerland is it? It’s a mystery. And similarly, Tether’s auditing practices look like a bit of a joke when compared to those of Paxos. Now, Tether could comfortably pay any of the world’s top auditors to attest to its gold reserves, but it has instead chosen the Italian arm of the US headquartered BDO audit advisory to publish quarterly opinion reports instead. These are not full audits, which Tether has stubbornly refused for years. Now, it’s not our intention to contribute to the ambient Tether FUD that permeates the cryptoverse. But if you’re interested in tokenized gold, we cannot see any reason to opt for Tether’s XAT over PAXG. The tokens are structurally very similar and have comparable market caps. But one issuer is transparent and well regulated, while the other is quite opaque and a bit of a maverick, shall we say. And hey, as strange as it may sound for a cryptofocused channel to be talking about investing in gold in the first place, all I’ll say is that well, a bit of diversification probably never hurt anyone. And indeed, with talk increasingly turning towards tokenized real world assets or RWAs and how they might be the next big thing for crypto, it’s worth remembering that one of the oldest assets of them all has been tokenized for quite a while now and very successfully. So perhaps this will serve as a great proof of concept for the RWA sector as a whole. Watch this space. Okay, if you’re feeling hungry for more gold content, then why not check out this video where we investigate claims that the world is running out of gold. I mean, is it? There’s only one way to find out. Feel free to show your appreciation by pounding the like and subscribe buttons to dust and ringing that notification bell so you don’t miss our next video. Thank you all for watching and I’ll see you again soon.
