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Publication date: October 4, 2024
What is Tether Gold
Tether Gold, often referred to as XAUt, is a cryptocurrency backed by physical gold. Each XAUt token represents ownership of one troy ounce (31.1035 grams) of gold held in vaults in Switzerland. This means that the value of an XAUt token is linked to the price of gold, making it attractive to investors who want to take advantage of the benefits of cryptocurrencies but also seek the stability of precious metals.
For investors, Tether Gold offers a bridge between the world of traditional commodity investing and the emerging world of digital currencies. Instead of buying and holding physical gold, investors can acquire and use Tether Gold tokens in the same way as other cryptocurrencies, but with the added security of the underlying gold value.
How does Tether Gold work?
Buying and holding Tether Gold works through blockchain technology. Users can acquire XAUt tokens on various cryptocurrency exchanges and store them in digital wallets, similar to other cryptocurrencies such as Bitcoin or Ethereum. The tokens are issued by Tether, a company known for the stablecoin USDT, and are backed by actual gold held in a secure vault.
The value of Tether Gold fluctuates based on the global price of gold, meaning that the price of an XAUt token is directly linked to the price of physical gold. This provides a more stable value compared to many other cryptocurrencies, which often suffer from high price volatility. This makes Tether Gold appealing to investors who value stability.
History of Tether Gold
Tether Gold was launched in January 2020 by Tether, one of the most prominent companies in the cryptocurrency sector. Tether was already known for its USDT stablecoin, which is pegged to the U.S. dollar. The introduction of Tether Gold marked their first step into the world of precious metal-based digital assets.
The demand for stable store of value in the form of gold increased due to the increasing uncertainties in the financial markets, caused in part by the COVID-19 pandemic. Tether responded to this demand by creating a token that combines the benefits of gold with the flexibility and accessibility of cryptocurrencies. Since its launch, Tether Gold has quickly established itself as a popular choice for investors looking to diversify into a secure store of value.
The prominence of Tether Gold continued to grow as more and more exchanges added the token to their platforms. Acceptance among institutional investors also increased, reinforcing the legitimacy of Tether Gold as a serious investment option.
What's up with Tether Gold?
Recently, Tether Gold has gained popularity, in part due to the rising demand for safe investments in times of economic uncertainty. Rising inflation and volatility in equity markets have encouraged investors to move their capital to stable assets such as gold and, increasingly, Tether Gold.
Another important development is the increasing demand for precious metal-backed cryptocurrencies. Tether Gold not only protects against inflation but also gives investors access to the speed and convenience of digital currencies. The availability of XAUt on various exchanges and the increase in trading volumes indicate that the market is responding positively to this form of gold investment.
In addition, Tether has announced that they are continuing to invest in optimizing their platform and expanding the infrastructure for Tether Gold. This includes improved transparency of their gold reserves and new partnerships with exchanges to make the token even more accessible globally.
Price development of Tether Gold
Since its launch, Tether Gold has shown a relatively stable price development. The price of XAUt closely tracks the global gold price, meaning the token is less susceptible to the huge fluctuations that other cryptocurrencies often exhibit. Throughout 2021 and 2022, there was steady growth in the price of gold, which also increased the value of Tether Gold.
In the past year, the price of Tether Gold has responded to developments in the global economy, including the rise in inflation and geopolitical tensions that have increased the demand for gold. This increased the demand for XAUt, which caused a slight increase in trading volumes and the value of the token.
Currently, the price of Tether Gold remains stable around the gold price. The chart below shows the price movement of Theter Gold since 2020.
Advantages of investing in Tether Gold
1. Stability of gold as a store of value: Gold is historically considered a stable store of value, meaning it is less volatile than many other assets, including fiat currency and stocks.
2. Easy access to gold: Tether Gold allows investors to invest in gold without the logistical challenges of physically buying and storing gold.
3. Volatility Limitation: Compared to other cryptocurrencies, Tether Gold offers a relatively stable price, making it an attractive alternative to risky digital assets.
4. Protection against inflation: Because the price of gold tends to rise during times of inflation, Tether Gold offers a way to protect purchasing power.
5. Digital flexibility: Users can enjoy the benefits of cryptocurrencies, such as quick and easy transactions, while also maintaining the stability of gold.
Disadvantages of investing in Tether Gold
1. Slower earnings growth: The price of gold tends to rise steadily, but not as fast as the prices of more speculative crypto-currencies, making rapid gains less likely.
2. Storage and insurance costs: Although Tether Gold represents physical gold, there are still costs incurred in storing and insuring the gold, which are borne indirectly by the user.
3. Limited liquidity: Compared to popular cryptocurrencies such as Bitcoin or Ethereum, Tether Gold is less tradable, which can lead to lower liquidity.
4. Strong dependence on gold price: Although gold has a stable value, Tether Gold remains completely dependent on the price fluctuations of physical gold.
5. Not suitable for short-term speculation: Because of gold's stability, Tether Gold's price movements are less volatile, making it less suitable for short-term speculators looking for quick profits.
