Crypto investors are piling into tokenized gold as digital asset markets are treading water, sending inflows to Paxos' gold token to a record in January.

Paxos Gold (PAXG), backed by physical gold held in LBMA vaults in London, raked in more than $248 million fresh capital through January, DefiLlama data shows. That lifted PAXG's market capitalization over $2.2 billion, trailing only XAUT$5,380.55.

The wave of inflows coincide with gold enjoying a blistering rally. The precious metal crossed $5,300 per ounce on Wednesday, soaring 22% through January and gaining more than 90% in the past year. Meanwhile, bitcoin BTC$89,186.68 has slid over 10% in a year and the broader crypto market sunk

This dynamic has shifted some crypto investors' attention toward blockchain-based gold, looking for protection in an uncertain macro environment, said James Harris, CEO of crypto yield platform Tesseract Group.

"The growing traction of tokenized gold has improved gold’s utility, particularly around transferability and divisibility," he said, "while bitcoin continues to trade more like a risk asset in periods of macro uncertainty."

Tokens like PAXG and XAUT offer fractional ownership of physical gold, with blockchain-based transfers and crypto wallet compatibility. For investors, it’s a way to hold a centuries-old store of value without needing a vault.

The total market for tokenized gold has now topped $5.5 billion, according to CoinGecko, marking an all-time high as both inflows and gold prices push the sector to new heights.