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Kraken Crypto Asset Spotlight: PAX Gold Shines Amid March Market Turmoil

Kraken’s ‘Crypto Asset Spotlight’ takes a closer look at crypto assets trading on our exchange when they display notable trends. 

Figure 1: Crypto pairs with the largest increases in March trading volume.

In a month when most of the crypto asset market was mired in red candles, Kraken traders may have noticed one notable exception, PAX Gold (PAXG). 

PAXG trading volume across all trading pairs listed on Kraken increased to almost $13 million in March, up from just over $2 million in February. 

Trading volumes in USD saw the largest increase, rising 707% in March.

Figure 2: Increases in trading volumes on Kraken over the month of March (PAXG vs. crypto market).

Notably, the recent surge was fueled by a strong second half of March trading. 

PAXG closed up 2.5% from its monthly open. This may not seem impressive, but consider the Dow Jones Industrial Average dropped by 14% during the same period.

What is PAX Gold?  

A token running on Ethereum, one PAX Gold (PAXG) is backed by one fine troy ounce of gold. This means that the price of PAXG is tied to the market value of the physical gold it represents.

PAXG is:

  • Backed by gold secured in Brinks vaults and held in custody through Paxos Trust Company, a regulated firm subject to monthly audits by a nationally ranked auditor
  • Friendly to small investors who can easily own fractions of a gold bar
  • Redeemable for LBMA-accredited Good Delivery gold bullion bars, or in smaller amounts through a worldwide network of physical gold retailers
  • Redeemable for USD at current gold market prices

Project website: https://www.paxos.com/paxgold/ 

What Might Be Behind the Move? 

Kraken clients appear to see PAXG as a safe haven of late since it is backed by gold, which typically acts as a safe haven amidst economic uncertainty. 

Although the price of gold dropped along with other markets in mid-March, it rebounded toward the end of the month and has overall shown some relative strength. 

Similarly, PAXG performed well against the broader crypto markets in March. PAXG/XBT closed the month up 35%, meaning that the value of PAXG rose 35% against BTC over this period.

What to Watch for Ahead? 

If the Coronavirus pandemic leads to global recession, gold may turn out to be a valuable safe haven asset for traders. In the 2008 financial crisis, gold prices initially declined by more than 20%, before recovering and embarking on an impressive 3-year bull run.  

Although PAXG would track any gains in gold, this does not mean PAXG will continue to show relative strength in the crypto markets. 

Many Bitcoin advocates think it will prove to be a better long-term store of value than gold, and expect Bitcoin, along with other crypto assets, to rebound more strongly compared to PAXG in the long run.

Only time will tell, but for the moment at least, the huge jump in PAXG trading volumes on Kraken shows that the asset is getting more attention from our traders.