The Crypto Gold PAXG contract once again outperforms Bitcoin (BTC) in the recent market bloodbath. Since the collapse began on June 7, PAXG has shown an astonishing market performance, up 50% against BTC at one point. Later, when the situation calmed down, its quotes fell by 7% and its price now remains at the level of 0.08076 against BTC, or $1,819 in dollar equivalent.

It should be remembered that PAXG, issued by Paxos, is a token backed by real gold in a ratio of 1:1. Its link to gold makes it the type of tool that allows crypto investors to mine gold without leaving the cryptocurrency market ecosystem.

Is gold or its crypto analog a defensive asset during a crisis?

Historically, financial markets have been dominated by the belief that gold is the asset most capable of protecting funds from inflation, at a minimum, and severe economic shocks, at a maximum. However, that’s not entirely true, at least as far as the last point is concerned.

Yes, in the face of geopolitical shocks or inflation, gold is a protective asset because the economic situation of agents does not change, and they reallocate the funds in favor of a “safe haven”. If we talk about a situation of market collapse, it is associated with a drop in income for investors and, consequently, a drop in demand for precious metals.

Of course, the rise of PAXG against Bitcoin is impressive at first sight. However, on the PAXG to USDT chart, the picture is not so good anymore. Since the beginning of the same time period in question, the price per token initially rose from $1,836 by 3% to $1,896, but then quickly fell by 3.69% to $1,819, which is still lower than the June 7 price.

Is gold or its crypto analog a defensive asset during a crisis? The question is creative. The diversification benefits of adding gold to your portfolio are obvious since the precious metal or its crypto counterpart has no direct correlation to economic cycles. However, lack of correlation and negative correlation are very different things.

Gold, and PAXG in particular, is no less volatile than BTC or ETH, and it could well lose value. You must therefore be careful in formulating a “protective asset” and clearly distinguish between the processes against which gold protects and the moments of “safe haven” in gold which may not be worth being research.