The gold-backed digital asset from Paxos spiked to an all-time high over the weekend amid a backdrop of rising tensions in the Middle East, leading to some questioning Bitcoin’s (BTC) value as a geopolitical hedge. 

The PAXG gold-backed crypto token hit $2,855 on April 13 as Bitcoin prices conversely tanked $5,000 in a matter of hours from over $67,500 to bottom out at around $62,700 in a 7.5% daily rout, according to data from CoinGecko.

“Bitcoin may be many things, but it is not a geopolitical hedge,” commented Bob Elliott, co-founder and CEO of Unlimited Funds and former executive of Bridgewater, in a post on X.

Geopolitical tensions in the Middle East were ramped up over the weekend following an Iranian drone and missile attack on Israeli targets.

The former Bridgewater Associates research head added that this weekend was another good empirical test as BTC traded with a “near-perfect negative correlation over the last day to PAXG.”

“If anything, it’s becoming an even worse hedge over time,” he exclaimed.

BTC and PAXG prices. Source: Bob Elliott

The PAXG token could not sustain momentum, however, and retreated to its previous spot gold-linked price level of around $2,376 at the time of writing.

The asset has made slow and steady progress since the beginning of March, rising 20% in tandem with prices of the underlying precious yellow metal, which hit a peak of $2,400 per ounce last week.

However, some noted that the Paxos token has very little liquidity, with just $36 million daily volume compared to major high-cap crypto assets that trade in the billions.

Glassnode on-chain analyst “Checkmatey” commented that those who “posted about the price of an illiquid gold token trading higher today as a dunk on Bitcoin are an unserious market commentator.”

Meanwhile, Elliot observed that Bitcoin exhibited similar market action last year when it traded down in the period following the Oct. 7 Hamas attack on Israel, while gold traded up.

“These correlations look to be getting more negative over time,” added Elliott, who cited the Russian invasion of Ukraine in February 2022.

“BTC largely traded randomly in a relatively tight range in the lead-up and following the invasion,” he added. Gold prices jumped 12% during February and March that year.

Analyst Willy Woo also referred to price action during the outbreak of the Russia-Ukraine war, adding that Bitcoin “recovery happens within days.”

Related: Bitcoin nosedives as political tensions escalate in the Middle East

Elliott concluded that from a geopolitical perspective, Bitcoin is not a store of value asset, and its broader use may link it more closely to aggregate financial assets.

“Along the geopolitical dimension, its pretty conclusive BTC is not ‘digital gold.’”

At the time of writing, Bitcoin had already started its recovery from the weekend dump, topping $65,800 in early trading on April 15.

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