Amidst the turmoil in the Middle East, particularly following the missile and drone attack, PAXG surged to unprecedented heights, reaching a pinnacle of $2,855 on April 13. This remarkable price surge of PAXG during the weekend has not only caught the attention of investors but has also spurred discussions regarding the role of Bitcoin as a geopolitical hedge.
The significant surge in the price of PAXG has prompted many to ponder whether Bitcoin, long hailed as a hedge against geopolitical uncertainties, remains a reliable asset in times of heightened conflict. As PAXG, a gold-backed token, soared to new heights, Bitcoin experienced a notable dip in its price trajectory. Bitcoin’s value plummeted from $67,140 to approximately $62,000, as reported by CoinMarketCap, further fueling debates about the efficacy of Bitcoin as a hedge in the face of geopolitical unrest.
This contrasting movement in the prices of PAXG and Bitcoin has sparked a renewed interest in understanding the dynamics of the cryptocurrency market, particularly in relation to geopolitical events. Investors and analysts alike are closely scrutinizing these developments to glean insights into the evolving landscape of digital assets and their potential as hedging instruments in times of geopolitical instability.
According to research conducted by Bridgewater Associates, Bitcoin’s trading volume exhibited a “near-perfect negative correlation with PAXG” over the past day. The research suggested that Bitcoin’s effectiveness as a hedge may be diminishing, stating that “if anything, it’s becoming an even less reliable hedge over time.”
However, the momentum of the PAXG token was not sustained, retracting to $2,363 at the time of writing.
Since the start of March, the price of PAXG has experienced gradual growth, reaching a peak of $2,400 per ounce last week attributed to a 20% surge in gold prices.
Nevertheless, Paxos liquidity remains relatively stable compared to major crypto assets like Bitcoin, which often witness trading volumes in the billions.
Past international conflicts that impacted the value of Bitcoin
Similarly, Bitcoin’s value plummeted on Oct 7 following the Hamas attack on Israel, while gold went up.
Another instance of Bitcoin price fluctuation is when Russia announced its Ukraine invasion.
“The value of the cryptocurrency dropped around 7.5 percent on Thursday morning, as traditional markets were also thrown into disarray,” Independent stated.
Bitcoin is not a store of value, and its use may link more to aggregate financial assets.
“Along the geopolitical dimension, it’s pretty conclusive BTC is not digital gold.’”
At the time of writing, Bitcoin has already begun recovering from the weekend dump, rising above $66,700 on April 15.
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