Over the weekend, the conflict between Israel and Iran dealt a heavy blow to the cryptocurrency market, resulting in liquidations amounting to nearly $2 billion. Meanwhile, Paxos Gold (PAXG), the second-largest stablecoin by market capitalization, performed exceptionally well, surging 40% in a single day to reach a new high. The contrasting trends between Bitcoin and PAXG have sparked a reassessment of Bitcoin’s ability as a hedge asset.
During the weekend, the conflict between Israel and Iran caused significant turmoil in the cryptocurrency market. Bitcoin plummeted to $60,000 within half an hour, experiencing a sharp decline of over 10%. Other altcoins also faced significant corrections, leading to a total liquidation amount of nearly $2 billion in the past two days.
In contrast, Paxos Gold (PAXG), the second-largest stablecoin by market capitalization, saw a remarkable surge of 40% and reached a new high. It synchronized with the gold price in the traditional financial market, highlighting its effectiveness as a hedge asset.
Data from the Binance market showed that PAXG reached a historical high of approximately $3,295 around 4:00 AM on the 14th. It had a maximum daily increase of nearly 40%. This price represented a premium of over 40% compared to the closing price of $2,342.90 for physical gold on Friday.
As the conflict has not escalated further, PAXG has since dropped to $2,366, experiencing a 1.58% decline in the past 24 hours and gradually aligning with the price of physical gold.
In response to this, a spokesperson from Paxos mentioned that geopolitical events do impact the price of gold. However, determining the exact pricing of gold at any given moment is neither simple nor direct. They further explained that the contrasting price trends between Bitcoin and PAXG have raised discussions within the community. Some internet users argue that “Bitcoin is not a hedge asset” and “Bitcoin cannot withstand the risks of war. Believers should reconsider what kind of asset Bitcoin is.”
Former Bridgewater Associates executive Bob Elliot expressed that Bitcoin may be many things, but it is not a geopolitical hedge tool.
However, as Phyrex points out, when discussing whether Bitcoin is a hedge or risk asset, it is necessary to separate the discussions for “high-net-worth investors” and “ordinary investors.” For high-net-worth investors, Bitcoin is indeed a hedge asset, but it hedges against counterparty risk rather than depreciation risk. For them, factors such as portability, ease of settlement, and even the aspect of “crossing” censorship are the fundamental reasons. Additionally, based on Phyrex’s statistics on Bitcoin holdings on the 14th, although high-net-worth investors’ positions have fluctuated, overall, they continue to increase their Bitcoin holdings.
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