Why Some Investors Are Buying Gold-Backed Cryptocurrency Instead of Bitcoin
Key Points
The price trajectories of Bitcoin and gold are diverging, leading investors to seek out other forms of "digital gold."
Gold-backed stablecoins are now surging in popularity, led by cryptocurrencies such as PAX Gold.
Digital gold has certain inherent advantages over physical gold, including greater ease of trading and enhanced security.
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The combination of geopolitical instability and macroeconomic uncertainty is leading many risk-averse investors to search out safe-haven assets. It's no surprise, then, that gold has been soaring in value for more than a year now.
But here's what is surprising: investors are now looking into ways to buy gold in the form of cryptocurrencies that can be traded and managed on the blockchain. For these investors, "digital gold" is now a better buy than physical gold, and here's why.
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What happened to Bitcoin as digital gold?
Until recently, buying digital gold usually meant buying Bitcoin (CRYPTO: BTC). The popular narrative was that Bitcoin was a long-term store of value, just like gold. Moreover, Bitcoin's inherent scarcity -- only 21 million coins can ever be in circulation -- made it similar to gold, which also has a finite supply.
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But here's the thing: Bitcoin stopped behaving like gold in October 2025. That's when these two assets started to trade in completely opposite directions.
As soon as Bitcoin began to decline in value, the "Bitcoin is digital gold" investment thesis started to melt down. Bitcoin is now down 40% from its all-time high of $126,000 in October.
Meanwhile, gold continues to march higher. Its price is now an astronomical $4,840, and some think gold could hit $6,000 within the next 12 months. Gold is up 44% over the past 12 months alone.
The rise of gold stablecoins
Crypto investors have discovered gold-backed stablecoins as a potential replacement for Bitcoin. These stablecoins are cryptocurrencies that are pegged 1:1 to the price of gold.
That means that if the price of gold is soaring, then the prices of these stablecoins should also be soaring. And that, indeed, is what has been happening. PAX Gold (CRYPTO: PAXG) is up 11% in 2026. Another gold-backed stablecoin, Tether Gold (CRYPTO: XAUT), is up an identical 11% in 2026.
Advantages of gold-backed stablecoins
Admittedly, there are reasons to be skeptical about these gold-backed stablecoins. It probably seems like an odd workaround to use the crypto market -- infamous in some circles for being volatile, speculative, and scammy -- to invest in gold, right?
But some important properties of gold-backed stablecoins do make them preferable to physical gold. For one, they can be traded 24/7 and managed completely online.
Moreover, gold-backed stablecoins can be converted at any point into physical gold. For example, PAX Gold is fully backed by gold held in a London gold vault.
And there are other conveniences to holding a digital asset rather than a physical asset. For example, you don't have to worry about transporting heavy gold bars or buying a home safe.
The new digital gold?
For good reason, then, the market cap of PAX Gold has surged. It now ranks as the 35th-largest cryptocurrency in the world, with a nearly $2.5 billion market cap.
In 2026, crypto investors are ignoring Bitcoin in favor of gold-backed stablecoins. Bitcoin is down 15% for the year, while Pax Gold is up a resounding 11%. That gap in performance tells you all you need to know.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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