PAX Gold did the majority of the heavy lifting in pushing the gold token market cap past the $1 billion-mark, outperforming Tether Gold.

According to Arcane Research's latest weekly report, the market capitalization of gold-backed crypto tokens increased by 60% in 2022, surpassing $1 billion for the first time in history.

Gold shines, but Bitcoin falls short.

In 2022, investors flocked to the perceived safety of gold-backed crypto assets, the value of which is tied to the price of gold.

According to Arcane Research, the value of PAX Gold (PAXG), Tether Gold (XAUT), and other precious metal-backed digital assets has risen as investors "diversify inflation bets" within the crypto sector. This year, PAXG has outperformed Bitcoin (BTC), as shown in the chart below.

Gold has risen nearly 14 percent year to date to nearly $2,050 per ounce, its highest level since August 2020. Arcane observed:

"The rising gold price appears to have drawn more crypto investors to gold-backed tokens  because they allow crypto investors to diversify inflation bets using familiar crypto market infrastructure."

XAUT is outperformed by PAXG

PAX Gold contributed the most — approximately $500 million — increasing the market value of gold tokens to more than $1 billion. In comparison, its main rival, Tether Gold, experienced minimal growth, according to Arcane, who cited the chart below.

PAX Gold's total market cap is currently slightly more than $607 million, up 85 percent year to date. Similarly, Tether Gold's market capitalization increased to nearly $211 million, a 9.20 percent increase over the same period.

The smart money is driving the gold-token rise

According to Alexander Tkachenko, the creator and CEO of VNX, a Luxembourg-based regulated tokenized gold investment platform, educated investors have been more careful when investing in cryptocurrencies. He goes on to say that their choice to invest in gold-backed tokens demonstrates their preference for regulated digital assets in the face of continuous macroeconomic uncertainties.

Paxos, a New York State-chartered trust firm regulated by the New York State Department of Financial Services, is the issuer of PAXG (NYDFS). This corresponds to lower overhead risks, particularly because each PAXG in circulation is fully backed by an ounce of gold.

XAUT, on the other hand, does not seem to have been regulated by any authority in any jurisdiction, either inside or outside of the United States. According to its whitepaper, "no regulatory body has evaluated or authorized" its claims of being backed by gold.