USDt market capitalization rises rapidly, XAUt stands out.

Recently, Bloomberg's monthly cryptocurrency market analysis report pointed out that due to the widespread use cases of bridging to USD, the rise of USDt seems unstoppable, and surpassing Ethereum may just be a matter of time.

In fact, the market capitalization of USDt has indeed shown a significant expansion trend. This is mainly due to several factors: the increasing demand from cryptocurrency traders for margin trading, the rise of various gray industries, and the demand for US dollars from countries and regions that are under sanctions or have large fluctuations in their local currencies. These factors have jointly driven the continuous rise of USDt's market capitalization.

However, in addition to the highly publicized USDt, Tether has also issued stablecoins pegged to other assets, but these coins have received less market attention. According to data from Tether's official transparency page, in addition to USDt, Tether has launched stablecoins pegged to the euro, Chinese yuan, and gold: EURt, CNHt, and XAUt.

Among them, EURt was launched as early as 2014, but its current market capitalization is still less than 45 million euros. CNHt was issued in September 2019, with a current market capitalization of about 23 million RMB. Both of these stablecoins have quite limited market capitalization, trading volume, and number of exchanges listed.

In contrast, XAUt, which was just launched at the end of January this year, has performed remarkably well. According to Coingecko data, in just over 4 months since its launch, XAUt's market capitalization has risen to approximately 8.6 million USD, with a 24-hour trading volume exceeding 110,000 USD. Currently, XAUt has been listed on 5 exchanges including Bitfinex, FTX, BTSE, Deversifi, and Delta Exchange.

What are the reasons for XAUt's ability to achieve rapid rise in a short period of time? Who are its user groups? What is the current trading situation? In the context of USDt firmly sitting on the throne of stablecoins, will XAUt pose a new threat to it? To this end, PANews interviewed the heads of Tether and related trading platforms.

XAUt Rapid Expansion: Born in January, Grown in Economic Crisis

Tether may not have anticipated that shortly after issuing the gold stablecoin at the end of January, the COVID-19 pandemic would begin to spread globally. The resulting economic crisis provided fertile ground for the rapid rise of XAUt's market capitalization.

According to Tether's CTO Paolo, each XAUt is backed by one ounce of physical gold issued. This means that the rise in XAUt's market capitalization actually reflects the demand from investors for physical gold.

FTX CEO Sam Bankman-Fried stated that users interested in XAUt are mainly traders who wish to easily gain exposure to gold and have investment interests in both cryptocurrencies and gold.

The CEO of Delta Exchange, Pankaj, and the CFO of DeversoFi, Ross, share a similar view. They believe that XAUt provides a convenient channel for both retail and professional investors to invest in gold. The rise of XAUt is related to the aggressive monetary easing policies of global central banks and the economic recession triggered by the COVID-19 pandemic, prompting investors to seek to hedge risks through XAUt.

These views are consistent with changes in the macro environment. Since March, the Federal Reserve has announced a series of aggressive policies, such as launching a stimulus plan worth hundreds of billions of dollars, significantly lowering interest rates, and making unlimited purchases of corporate bonds, government bonds, and mortgage-backed securities. Economic turmoil has driven gold prices to soar. Factset data shows that the demand for gold trading products, such as SPDR Gold Shares ETF, has significantly increased, with weekly trading volumes exceeding $100 million in March, setting a new high in five years.

As a stablecoin linked to gold, XAUt seems to have become the true "digital gold". Paolo stated that investors do not need to pay custody fees for XAUt and can redeem physical gold with XAUt. Traditional gold ETFs/futures products generally do not support this feature. In addition, the minimum trading unit of XAUt can be precise to six decimal places, and it can be traded around the clock. These factors are undoubtedly important drivers for the rapid rise in XAUt's market capitalization in recent months.

The good development trend of XAUt not only attracts various users such as retail investors, professional traders, and institutional investors, but also prompts trading platforms to develop a richer variety of trading products around it.

Platforms that list XAUt mainly focus on futures contracts

According to data from the cryptocurrency data platform Nomics, Delta Exchange, FTX, and Bitfinex together account for about 85% of the trading volume of XAUt, with Delta Exchange's trading volume nearing half of the total, holding an absolute dominant position.

From the perspective of product form, several major trading platforms mainly trade derivatives of XAUt.

The CEO of Delta Exchange, Pankaj, stated that the platform currently mainly offers perpetual contracts for XAUt, and in the future, it may launch XAUt quarterly futures based on customer demand.

The CEO of FTX stated that the platform currently offers 3x leverage for long/short trading of XAUt and plans to launch spot margin trading for XAUt.

Bitfinex currently offers perpetual contracts and spot margin trading for XAUt.

The recently launched XAUt/USDt spot trading pair on BTSE also plans to venture into XAUt derivatives trading. Its Chief Product Officer Brian Wong stated that they will offer perpetual contracts and fixed-term contracts for XAUt, supporting trading pairs with fiat currencies, stablecoins, and even Bitcoin.

In addition to a diversified range of trading varieties, each platform has also planned the trading infrastructure for XAUt. Tether's Chief Technology Officer Paolo has previously confirmed to the media that as Bitfinex's compatibility with the Lightning Network continues to improve, stablecoins such as USDt and XAUt may be introduced to the Lightning Network in the future.

In an interview, both the CEO of FTX and the Chief Product Officer of BTSE stated that they have similar plans: FTX expects to complete the introduction of the Lightning Network within this year, at which point spot trading of XAUt may also be integrated; the Chief Product Officer of BTSE stated that the exchange has integrated Blockstream's sidechain solution Liquid, and the next step will be to introduce the Lightning Network. According to its CEO revealed on social media, this plan may be completed in a quarter.

Can XAUt become the next USDt?

In fact, the stablecoin sector anchored to gold has become very crowded. Reports indicate that over 30 gold-backed stablecoin projects have failed in the past few years, and currently there are more than 75 similar projects. Most of them are backed by 1 gram or 1 ounce of physical gold. In addition to Tether, institutions such as the London-based digital asset management group Coinshares, the New York state licensed digital asset service provider Paxos, and the well-known public blockchain Algorand are also involved in this field.

The data of the gold-backed stablecoin PAX Gold issued by Paxos is comparable to XAUt. According to Coingecko data, as of the time of writing, PAX Gold's 24-hour trading volume is nearly $480,000, far exceeding XAUt's more than $110,000.

Moreover, as a compliant licensed institution, Paxos's gold reserve audit credibility is obviously higher than that of XAUt. Whether the situation of USDt, which has non-full reserves yet thrives in the market, can be replicated for XAUt remains to be seen.

XAUt performs impressively in terms of market capitalization, trading volume, user base, and the richness of trading varieties, which inevitably leads one to imagine its future development. So, could XAUt grow to become the next USDt?

In this regard, Tether's CTO Paolo holds a negative view. He believes that although the gold behind XAUt is a common and popular investment target, its volatility is much higher than that of USDt. Moreover, issuing stablecoins pegged to gold is more complex than those pegged to fiat currencies, so he thinks it is difficult for XAUt's market capitalization to reach the scale of USDt.

Pankaj, the CEO of Delta Exchange, holds a similar view. He believes that USDt has become the de facto medium for cryptocurrency trading and is quickly becoming the default token for margin or derivative trading, which makes it difficult for XAUt, even when pegged to physical gold, to achieve a market capitalization close to that of USDt.

The CEO of FTX is relatively optimistic, believing that the gold-backed stablecoin represented by XAUt may reach a market capitalization peak of several billion dollars in the future.

The future market capitalization space for XAUt remains to be seen, but there are some urgent issues that need to be addressed during its development process. For example, Tether's ability to acquire gold amid a shortage of supply is in doubt. Reports suggest that in March of this year, as the COVID-19 pandemic spread globally, many multinational and cross-regional transport capabilities came to a halt, and Switzerland, where XAUt's gold reserves are located, was fully locked down, leading to a "gold source" shortage for Tether at that time. In contrast, during the same period, Paxos successfully increased its gold supply by 20% in response to market changes.

After the concepts of "Coin Reserve" and "Peer-to-Peer Electronic Cash" have basically taken root, can Tether once again earn the title of "Digital Gold"? We will wait and see.