This week, under the Eastern Eight Time Zone, the trading behavior of HyperLiquid's PAXG contracts has once again come under scrutiny: while prices have not shown extreme fluctuations, the directional distribution and high leverage behavior at the contract level are particularly striking. On one side, a narrative of "bearish dominance" is gradually forming in market discourse; on the other side, high-leverage trading addresses, originally known for aggressive long positions, are collectively turning to bet on a downturn, creating new suspense in the order book. Around these gold tokens, institutions and retail investors have provided starkly different pricing methods based on interest rates, ETF fund flows, sentiment, and narratives—PAXG is not only a reflection of gold prices but also a projection of different participants' risk preferences.
The Battlefield of Gold Tokens: The Starting Point of Bearish Pressure
● The Appearance of Bearish Dominance: In the PAXG contracts, recent transactions and positions have shown characteristics of "highly consistent direction and one-sided sentiment," leading market discourse to summarize this round of competition as "bearish dominance." Although there is a lack of specific position and funding rate data, changes in trading depth and order density are still signaling an increase in short-selling power. For participants accustomed to viewing PAXG as a position reflecting gold, this directional tilt at the contract level contrasts with the mild trend of spot gold, amplifying concerns about the imbalance of sentiment in the derivatives market.
● Preference for Interest Rates and Non-Interest Assets: At the macro level, the Bank of Japan maintains a short-term interest rate target of 0.75%, and its marginal impact on global asset pricing is accumulating. Higher risk-free rates typically weaken the willingness to allocate to non-interest assets, with gold and its tokenized counterparts being typical representatives. Some short-sellers have constructed their logic based on this: when interest rates rise or remain high, the opportunity cost of holding gold and PAXG increases, making contract positions betting on price corrections more attractive. This macro judgment based on interest rate expectations provides a seemingly "rational" shell for the PAXG bearish narrative.
● The Intertwining of Safe-Haven and Crypto Risks: Unlike traditional gold, PAXG, as an on-chain token, anchors to gold prices while also being included in the basket of risk assets in the crypto market. Thus, the short-selling logic presents a two-layer structure: first, it believes that gold lacks sustained upward momentum in the current interest rate and inflation environment; second, it believes that the overall risk appetite in crypto remains weak, leading to the simultaneous sell-off of tokenized gold. This "double negation" thought process makes PAXG contracts a vehicle for some traders to concentrate their macro pessimism and aversion to crypto risks.
High-Leverage Players Turn Around: From Betting on Upside to Betting on Downside
● From Aggressive Bulls to Inverted Bears: Previously, high-leverage traders preferred to go long on safe-haven narratives like PAXG, attempting to amplify the gains from upward movements in gold amid macro uncertainty and geopolitical risks. This model of "opening dangerous positions on safe assets" was once seen as a variant of risk management for smart money. However, the recent collective shift of these accounts to short PAXG indicates that they are no longer satisfied with the mild performance of safe-haven upside but are choosing to seek higher leverage returns in potential corrections.
● The Amplified Risks of Leverage Switching: Even if the outside world cannot obtain specific leverage multiples and profit-loss data, the direction of positions and adjustment frequency alone can feel the rapid amplification of risk. The switch from long to short in high leverage essentially reverses the logic of betting on "safe-haven premium expansion" to betting on "sentiment correction and leverage de-risking." Once the market's judgment on gold or overall crypto risk appetite deviates, such positions not only face the risk of forced liquidation but also amplify price volatility on-chain and in the order book, leading ordinary participants to mistakenly believe that a "fundamental collapse" has occurred.
● The Signal Effect of Address Behavior Being Amplified: In a high-leverage environment, some large addresses and account behaviors awaiting verification are spontaneously packaged by the market into stories of "bearish pioneers." Even when research briefs clearly indicate that the details and leverage situations of related addresses are still in a state of verification, the discourse still tends to interpret them as directional signals. As these stories spread in communities and social media, the bearish atmosphere around PAXG is further intensified, creating a subtle misalignment where "prices have not yet plummeted, but sentiment has already fallen ahead."
Divergence Between Institutions and Retail: How Should Gold Be Priced?
● Fundamental Differences in Pricing Frameworks: Institutional investors, when viewing gold and tokenized assets like PAXG, often prioritize quantitative signals such as interest rate paths, ETF fund flows, and risk models; whereas retail investors are more easily driven by narratives, sentiment, and short-term fluctuations. The former may see PAXG as a hedge against interest rate and inflation risks in their portfolios, while the latter may simply compare it to a "high-volatility token version of gold," focusing more on short-term gains and losses rather than allocation value. This divergence in pricing frameworks means that the same price range may be seen as "reasonable valuation" by institutions, while retail investors may view it as a "shorting opportunity" or "bottom-fishing signal."
● Cross-Signals of Risk Appetite: In the broader crypto market, the Solana spot ETF saw a net inflow of $1.71 million in a single day, and the Nasdaq's application to lift restrictions on crypto ETF options positions are both signaling a warming of institutional risk appetite. This interest in high beta public chains and derivative tools does not directly point to gold tokens, but in terms of asset allocation, it forms a clear thread: institutions are more willing to take risks on clearly regulated ETF and options products, viewing PAXG and similar tokens as "part of a structured portfolio," rather than the main battlefield for speculation.
● Safe-Haven Position or Speculative Tool: Within crypto portfolios, the positioning of PAXG shows significant divergence: some institutions use it as a "cash equivalent within the crypto system," temporarily parking during periods of extreme volatility; while retail investors and high-frequency traders treat PAXG contracts as "pseudo-safe high-leverage chips," attempting to leverage its relatively stable spot anchoring to amplify bets on short-term fluctuations. The result is that the same asset bears completely opposite tasks in different accounts—this also explains why PAXG contracts can experience extreme long-short tug-of-war even when spot prices are relatively stable.
Regulatory and Offshore Gaps: Liquidity is Being Redistributed
● Passive Migration Under Tightening Compliance: Bybit announced the termination of services in Japan, forcing Japanese traders to reselect derivative platforms against the backdrop of tightening local regulations. For some funds, this is not a proactive migration based on product advantages, but rather a passive behavior of "having to leave." In this situation, platforms that can provide high leverage, a wide variety of products, and relatively loose thresholds naturally become the preferred landing spots for offshore funds, bringing new sources of liquidity to multiple contract targets, including PAXG.
● The Synergy of Interest Rates and Offshore Funds: The Bank of Japan's maintenance of a 0.75% short-term interest rate target means that local funds still face yield pressure in a low-interest environment. When local compliance services tighten and optional channels decrease, some investors will more actively seek high-yield opportunities overseas, making crypto derivatives a prominent option. Contracts for gold tokens like PAXG are viewed as a "compromise solution" in this environment: they do not completely detach from traditional asset logic while attempting to amplify yield spreads and segment returns under high leverage.
● The Role of Marginal Funds: Under the combination of compliance and high leverage, PAXG contracts are gradually taking on the function of accommodating "marginal funds"—these funds may come from regulatory gaps, platform migrations, or settlements of other projects (such as the MilkyWay yield distribution mentioned in the brief circulating in a broader ecosystem), and are rapidly funneled into a few high-volatility targets in the absence of unified risk constraints. The result is that while PAXG's price still closely aligns with gold, its funding structure at the contract level increasingly resembles a concentrated bet against macro and regulatory uncertainties.
From Bitcoin Spirit to Gold Tokens: The Fork in Digital Value Consensus
● The Tension Between Tools and Hedge Assets: Vitalik Buterin once mentioned that Bitcoin's birth partly stemmed from a resistance to the impulse of "only chasing tools that everyone uses." This statement today reveals a tension: one type of asset hopes to become ubiquitous infrastructure, while another type acts more like a hedge tool in the hands of a few. PAXG is clearly closer to the latter; it does not seek to become a medium for daily payments but is designed to bring the properties of traditional gold on-chain, providing a "plug-and-play" risk buffer for specific groups.
● The Role Comparison of Anti-Inflation and Asset Allocation: Bitcoin, gold, and PAXG play different roles in the anti-inflation narrative. Bitcoin is shaped as a symbol of "long-term scarce assets," carrying more structural distrust of fiat systems; gold has been a cross-market inflation hedge tool for decades, with a consensus foundation; PAXG attempts to migrate this consensus on-chain to meet the needs of crypto participants for asset allocation and collateralization within the chain. It neither has the extreme imaginative space of Bitcoin nor can fully replicate gold's position in traditional finance, making it more likely to be viewed by the market as "a tool among tools," rather than the ultimate target.
● The Preference Divergence Reflected in Bearish Sentiment: The current bearish sentiment on PAXG contracts, to some extent, reflects the crypto circle's preference divergence between "digital gold" (Bitcoin) and "tokenized gold" (PAXG). More speculative funds are willing to bet on the narrative evolution and cyclical fluctuations of Bitcoin, while on PAXG, they tend to leverage small price differences rather than hold long-term. Thus, when the macro environment is not friendly to gold, PAXG is first treated as "a tool that can be shorted" to release sentiment, rather than as a long-term anti-inflation asset that needs to be taken seriously.
Long and Short Unresolved: What Direction Will Gold Tokens Take Next?
The narrative of bearish dominance and the collective shift to high leverage currently unfolding in PAXG contracts intertwine multiple forces: at the macro level, there is pressure from the Bank of Japan maintaining a 0.75% interest rate on non-interest assets; at the regulatory level, events like Bybit terminating services in Japan are driving fund migrations; at the micro level, high-leverage players are continuously switching directions and amplifying emotional volatility in the contract order book. From these three perspectives, PAXG is no longer just a passive reflection of gold prices but a complex interface aggregating macro expectations, regulatory gaps, and leverage games.
What truly determines the future trajectory of PAXG remains the interplay of interest rate paths, regulatory environments, and institutional fund preferences: if interest rates remain high, it will compress the valuation space for gold and its tokens; if regulation continues to diverge, it will prompt more offshore funds to flow into high-leverage platforms; if institutions strengthen their use of compliant tools like ETFs and options, it may weaken PAXG's core position in portfolios. In this uncertain intersection, PAXG has roughly two possible paths ahead: first, returning to the role of "on-chain safe-haven position," allowing prices to follow gold itself more closely rather than contract sentiment; second, continuing to be treated by the market as a high beta speculative chip, becoming the preferred battleground for long-short tug-of-war in each round of macro and crypto cycles.
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