As the price of spot gold continues to hit new highs and global investors flock in search of safe havens, the cryptocurrency PAX Gold (PAXG), which is supposed to be pegged to gold at a 1:1 ratio, has experienced a shocking "flash crash" and "spike" within just a week. On October 11, the price of PAXG plummeted by 22% on the Binance platform, triggering large-scale liquidations; on October 17, it bizarrely spiked upwards, with prices on some platforms briefly exceeding $4,800. This series of extreme fluctuations not only exposed the vulnerability of Real World Asset (RWA) tokens in the highly volatile crypto market but also led to strong dissatisfaction among users due to suspected interface issues on the Binance platform and subsequent handling. The community is calling for regulatory intervention, and a trust crisis regarding the RWA trust mechanism and platform responsibility is erupting in the crypto market.
- PAXG's "Flash Crash": A Trust Crisis Amidst the Gold Bull Market
On October 11, 2025, PAXG, which should have remained stable, encountered a "flash crash" in the crypto market.
Price Shock: PAXG on the Binance platform suddenly dropped from about $3,950 to $3,087, a decline of 22%. On the same day, its volatility reached 31.65%, far exceeding the typical daily fluctuation range of about 2% for gold.
Liquidation Wave: This flash crash triggered a large-scale liquidation wave, with multiple users posting on X (formerly Twitter) about their losses. One trader named @ChaoAzen stated that his $10,000 position was completely liquidated within minutes without any warning.
Weak Liquidity: This incident occurred over the weekend when the international gold market was closed, which should have kept PAXG's price stable. However, due to weak trading depth on Binance (with daily trading volume below $10 million), large-scale liquidations of leveraged positions further exacerbated the price drop.
- Community Calls for Regulatory Investigation: The "Stable" Myth of PAXG Shattered?
The flash crash of PAXG completely shattered its trust foundation as a "gold stablecoin," leading to strong dissatisfaction in the community and calls for regulatory intervention.
Questioning Market Manipulation: With spot gold prices hitting a historical high of $4,015 per ounce, the 31% drop in PAXG raised suspicions among many users about potential market manipulation.
Calling for NYDFS Intervention: The victimized community did not remain passive. A user named @Rocky_Bitcoin initiated a call on X, urging everyone to contact the regulatory body of PAXG issuer Paxos—the New York State Department of Financial Services (NYDFS)—hoping to prompt an official investigation into the matter.
Paxos' Past Record: The public also revisited Paxos' previous $500,000 fine from NYDFS in 2023 for "weak risk control mechanisms," raising doubts about whether it fulfilled its regulatory responsibilities during this crisis.
- PAXG's "Spike" Rebound: Extreme Volatility Intensifies the Trust Crisis
The turmoil of PAXG did not stop at the flash crash. On October 17, PAXG experienced extreme volatility again, with prices bizarrely spiking upwards.
Abnormal Price Surge: Around 6 AM Beijing time today, the Binance PAXGUSDT perpetual contract briefly spiked upwards, showing an increase of about 16%, reaching $5,106; simultaneously, the PAXG spot price on Binance saw an upward spike of over 8%, briefly touching $4,790. According to Coingecko data, PAXG experienced similar spikes on other major platforms, even exceeding $4,800 at one point.
Short Liquidation Speculation: Community analysis suggests that this upward spike may have been caused by the liquidation of a short contract trader on the BNB platform, with $6.82 million in PAXG liquidations across the network in the past four hours, including $5.5453 million in short positions.
Trust Crisis Intensifies: These recurring extreme price fluctuations have led investors to completely lose confidence in PAXG's "stable" attributes, further exacerbating the trust crisis in the crypto market.
- RWA Market Risks Surface: Regulatory Oversight and Transparency Urgently Needed
The two extreme fluctuations of PAXG not only highlight issues with a single stablecoin but also expose the risks in the Real World Asset (RWA) token market.
Vulnerability of RWA: As a representative of gold RWA, the severe price fluctuations of PAXG underscore the liquidity, leverage, and platform risks that may arise when traditional physical assets are tokenized in the crypto market.
Call for Regulation: Market experts and community opinion leaders are urging regulatory bodies to strengthen regulations on the interaction between on-chain assets and centralized exchanges, and to improve platform operational transparency.
Platform Responsibility: Following the October 11 incident, Binance announced a compensation plan (compensating users over $280 million and clarifying that the decoupling was not the main cause of the market crash) and risk control upgrades (including incorporating redemption prices into the BNSOL, WBETH, and USDE index weights, setting a minimum price limit for USDE, and increasing the frequency of risk control parameter reviews). However, co-founder He Yi's comments during crisis management, stating that "the value of the altcoin is zero," ignited community outrage and raised questions about the platform's responsibility and empathy.
Conclusion:
The flash crash and spike of PAXG amidst the gold bull market is one of the most concerning events in the cryptocurrency market recently. It not only reveals the potential vulnerabilities of RWA tokenization in a highly volatile market but also warns of the importance of risk control mechanisms, transparency, and crisis management for centralized exchanges when handling such events. The community's strong call for regulatory investigation indicates that the RWA and stablecoin markets will face stricter scrutiny in the future. This trust crisis will prompt the entire crypto industry to reassess its commitment to "stability" and accelerate the establishment of a more robust regulatory framework and more transparent operational mechanisms.
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Original Article: “PAXG Decouples from Gold in Flash Crash as Community Calls for Regulatory Probe into Market Manipulation”
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