What is Tether Gold: The gold-backed stablecoin

XAUT is letting investors easily trade gold, but how accessible is it?

The Tether Gold logo on a coin                                 
Each XAUT token is pegged to the price of a troy ounce of gold – Photo: Shutterstock
                                

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Tether has made a name for itself with its USDT stablecoin. It is now looking to continue building on this reputation with its XAUT token that is physically backed to gold.

But not all experts are convinced that a digital gold asset is necessary as some describe the commodity as outdated and lacking utility.

What is Tether Gold?

Tether, the company behind the industry standard USDT stablecoin, has created another non-volatile digital asset. XAUT is a cryptocurrency pegged to the price of gold to provide an easy and accessible way to invest in the commodity.

Every one Tether Gold is equal to a troy fine ounce of gold, which are backed using physical London Good Delivery (LGD) standard bars. The LGD guidelines require a bar to have 400 troy ounces.

The Tether Gold website states: “Holders of XAUT obtain the combined benefits of both physical and digital assets. XAUT token holders will be able to enjoy ownership of gold while avoiding drawbacks associated with physical gold, such as high storage costs and limited accessibility.”

The benefits of XAUT

For those looking to invest in digital gold, XAUT does have its advantages. The cryptocurrency is an ERC-20 token, meaning it can be moved easily on the Ethereum blockchain and transferred to different addresses.

The physical reserve of gold to back the stablecoin will bring more security to the cryptocurrency as well. Reserve backed cryptocurrencies have a history of being safer than algorithm-based stablecoins like LUNA, giving hope that the XAUT price can maintain its peg.

Tether Gold holders have ownership rights to specific physical bars and can identify the details with a unique serial number. They can even redeem their tokens for the real thing by going through a verification process.

Its website wrote: “The holder’s physical gold can be delivered to a location of their choice in Switzerland or the holder can request that TG Commodities Limited attempt to sell the gold and receive the cash proceeds from that sale.”

Tether has built up a sturdy reputation for developing stablecoins. It launched the USD backed token in 2014, which it claims “pioneered the stablecoin model”. This has translated into one of the most traded and liquid tokens.

The company’s anti-money-laundering measures and know-your-customer checks have also seen it become a favourable option by investors and regulators.

Stablecoin crash

Stablecoins have had a bad press recently after the collapse of TerraUSD (UST) – now branded as TerraClassicUSD (USTC). Once a safe haven for investors, the UST cryptocurrency lost its $1 peg and plummeted below $0.01.

This genre of cryptocurrency was designed for investors to escape volatile conditions. But the stress of the bear market has seen even safe cryptos lose their peg. The Terra ecosystem was not alone. Tether’s USDT coin dipped to $0.96 after the crash, raising concerns on whether it will be the next stablecoin to collapse.

Since then, the Tether market cap has been falling as more turn to alternative stablecoins. On 16 June, USDT’s market cap dropped below $70bn for the first time in eight months. Meanwhile, its main competitor USDC has progressively been gaining in popularity.

While Tether Gold is backed by an entirely different asset, a loss of trust in the company’s other products could easily backfire into XAUT.

Tether Gold vs PAX Gold

XAUT coin and gold backed stablecoins certainly have their benefits. It gives investors a convenient way to invest in the commoditity, without worrying about storage costs. However, the accessibility of Tether Gold can be debated as investors need to purchase a minimum amount of 50 XAUT, which is roughly $92,000 at the time of writing. This presents a substantial barrier for casual traders.

A problem affecting most gold-backed cryptocurrencies is utility. While stablecoins can be used as a store of value, they are also utilised in decentralised finance (DeFi). However, digital gold does not have nearly the same amount of utility compared with USDT or USDC.

CoinTelegraph has gone as far to describe gold as an outdated asset. It wrote: “Millennials or the new generation do not and will not rely on old-world values such as gold, which is nothing but a relic of the past for them.”

Even when looking at Tether Gold alone, it is still lagging behind its competition. PAX Gold is one of the largest gold-backed stablecoins with its market cap currently ranked 66 out of all cryptocurrencies. Meanwhile, XAUT is trailing behind with it ranked number 214.

With Tether launching a new cryptocurrency  that is pegged to the British pound, it clearly wants to become the go-to hub for stablecoins. Whether it can achieve this goal will depend on the trust it builds with investors.

FAQs

Tether Gold is a stablecoin under the ticker XAUT, where each token is pegged to the price of one troy ounce of gold. The amount of tokens are physically backed with the same quantity of gold bars using the London Good Delivery standard.

A stablecoin is a type of cryptocurrency that’s price is linked to a non-digital asset. Most stablecoins, like USDT and USDC, are pegged to the price of a dollar. But in the case of XAUT, it tracks the price of gold.

XAUT was designed for investors to easily trade gold without any accessibility barriers, like storage. However, it is important to note that a minimum quantity of 50 XAUT must be purchased, which is roughly $92,000.

There is a circulating supply of 246,524 XAUT.

While Tether Gold is not tradeable on Currency.Com, XAUT can be purchased on Bitfinex, Gate.io, and FTX exchanges, according to CoinMarketCap.

Further reading

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