If you’ve ever explored tokenized assets like PAX Gold (PAXG), you might have spotted something curious:
The market cap of PAXG moves almost exactly like the price of gold.
At first, that feels strange.
After all, tokenized gold is its own market, right? Shouldn’t PAXG’s market cap reflect growing demand for blockchain-based gold, rather than just copying gold’s price?
The answer turns out to be both simple and revealing — and it teaches us something important about how tokenized assets behave today compared to the real-world commodities they represent.
Let’s dive into it.
How PAXG Works
PAXG is a blockchain token backed 1:1 by physical gold.
Each PAXG token represents one fine troy ounce of gold held in secure vaults, managed by Paxos.
Whenever someone mints PAXG, Paxos buys a corresponding amount of real gold.
Whenever someone redeems PAXG, Paxos sells the gold and burns the token.
This strict backing ensures that PAXG’s supply matches the amount of gold Paxos holds — but crucially, PAXG itself doesn’t influence the global price of gold.
Gold’s price is set by enormous traditional markets like COMEX and the London Bullion Market, where trading volumes dwarf tokenized gold markets by orders of magnitude.
Price vs Market Cap
Now here’s where it gets interesting:
- Today, PAXG’s price closely tracks the global spot price of gold.
- PAXG’s market cap = (total number of PAXG tokens) × (price per token).
The important thing is:
- Gold’s price moves constantly, minute by minute.
- PAXG’s supply — the number of tokens in circulation — changes much more slowly, only when people mint or redeem tokens.
As a result, right now, almost all the movement in PAXG’s market cap is driven by changes in gold’s price, not by large swings in supply.
This is why when you look at a chart of PAXG’s market cap, it seems to “mirror” the price of gold — because, at today’s scale, it basically does.
Why Supply Changes So Little (For Now)
If tokenized gold were exploding in popularity overnight, you’d expect a flood of new PAXG minting, and a market cap that outpaced gold’s price movements.
But that’s not what’s happening — at least not yet.
Today:
- PAXG supply grows slowly and steadily.
- Daily trading volumes for PAXG are small compared to the massive liquidity of global gold markets.
- New net demand (minting) and net redemptions (burning) happen, but they’re modest compared to the volatility of the gold price itself.
So for now, price volatility dominates, and PAXG’s market cap mostly just rides gold’s ups and downs.
Of course, if tokenized gold adoption ever surged dramatically, this dynamic could change.
Rapid minting of new PAXG tokens would increase total supply meaningfully, and market cap growth would no longer be driven by price alone.
A Quick Example
Imagine:
- 500,000 PAXG tokens exist today.
- Gold price = $2,000/oz.
- Market cap = 500,000 × $2,000 = $1 billion.
If gold rises 5% to $2,100/oz:
- PAXG supply stays almost flat (maybe a few hundred tokens minted or redeemed).
- New Market Cap ≈ 500,000 × $2,100 = $1.05 billion.
The market cap has risen almost entirely because of the gold price movement, not because thousands of new buyers suddenly rushed into PAXG.
But — if suddenly millions of new buyers wanted tokenized gold and Paxos minted hundreds of thousands of new tokens, the market cap would start growing faster than the gold price itself.
When Would This Change?
If there were a massive surge of interest in tokenized gold — let’s say millions of new PAXG tokens minted in a short time — we would start to see PAXG’s market cap grow independently of gold’s price.
In that case:
- PAXG supply would rise sharply.
- The market cap graph would no longer “just mirror” gold’s price movements.
But today, tokenized gold remains a relatively small niche compared to the trillions traded in traditional gold markets.
Until that changes, PAXG’s market cap will continue to track gold’s spot price closely — not because it has to, but because of the current scale and trading patterns.
Final Thoughts
The mirror effect between PAXG’s market cap and gold’s price isn’t a coincidence.
It’s a reflection of two simple realities today:
- Gold’s price moves fast.
- PAXG’s supply moves slow.
As tokenized gold adoption grows, this relationship could shift dramatically.
In a future where tokenized assets play a much bigger role in global commodities markets, PAXG’s supply — and thus its market cap — could start to move on its own terms.
But for now, the story is simple:
PAXG’s market cap still dances to gold’s tune — not to its own.
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