Tether (USDT) Explained

Tether (USDT) is not much different than with any other cryptocurrencies. So what is Tether, this stable cryptocurrency and why is it pegged to the dollar?
Tether USDT Explained

What is Tether(USDT)?

Market Capitalisation and Price of Tether(USDT)

What is Tether

The Tether, whose ticker is USDT, is a digital token issued on various blockchains and backed by the U.S. dollar (USD) thanks to the guarantee of the company Tether Limited. Created in 2014 under the name Realcoin, it is the first stable coin of its kind. The Tether is always traded close to $1.

Note that Tether Ltd. also offers other products such as Tether Gold (XAUT), Tether EUR (EURT), or Tether CNH (CNHT), but the USDT remains their main product.

How is Tether dollar-backed?

Tether USD is 100% collateralized by dollar reserves in the bank account of Tether Ltd. Each USDT corresponds (in theory) to one existing US dollar. The company is thus able to provide USDT to those who wish to obtain them in exchange for dollars and is also entitled to donate dollars in exchange for USDT.

This balance is therefore based on trust in the company. In order to maximize this trust, Tether Ltd. provides information on the management of USDT in a transparent manner on their website. In addition, the company conducts regular audits to show that it has the equivalent amount in dollars.

On which blockchain is Tether(USDT) being transferred?

Originally issued on Bitcoin’s Omni layer, the outstanding amount of Tether USD is now distributed among several blockchains (September 2020):

What is the use of Tether?

The interest of the Tether USD (and stablecoins) is double.

Its first interest is to allow cryptocurrency exchange platforms to have access to the US dollar, without having to manage real dollars. Since the regulations for transferring and keeping fiat currency are drastic, this is a huge advantage for trading platforms managing only cryptocurrencies.

The second interest of the Tether USD is to offer users a way to hedge against the volatility of the cryptos market. Without actually having to resell their coins, they avoid the corresponding tax charges: for example, in France, the government charges you 30% of the capital gains made on fiat exchanges.

What are Stablecoins?

If you wish to learn more about the stablecoins, you can find a full Lesson about them.

Why do we need Tether(USDT)?

Tether (USDT) is a centralized cryptocurrency meant to mirror the value of the US dollar. This cryptocurrency can be used as a “Digital Dollar”.

The primary use of Tether is to offer stability to the cryptocurrency traders and investors. Instead of having to go everytime to a KYC exchange, your favorite classic cryptocurrency exchange will provide you with USDT pairs. Those exchanges usually cannot deal with dollars and banks.

With USDT, you are able to move into a coin that will not fluctuate as much as cryptocurrencies, and then preserve your capital.

Tether(USDT): a controversial company

Over the past several years, numerous events have cast doubt on Tether’s assurances that there is one dollar for every USDT in circulation, which amounted to 14.16 billion in September 2020. Among other things, repeated requests for independent audits have gone unheeded, and the storage of the funds is carried out at a rather anonymous bank located in the Bahamas. All this does not fail to worry investors.

If it were proven that Tether’s reserves do not correspond to reality, it would represent a gulf in the cryptocurrencies market. We could see a probable drop in the overall market valuations and a loss of confidence, which would be reported with delight in the mass media.

A decline in public confidence would first be visible in the valuation of Tether, as the price of the asset is an indicator of Tether’s ability to secure its reserves. At one dollar per USDT, this capacity is judged by the robust market. At lower price levels, doubts are raised.

By observing the evolution of the USDT valuation, the asset actually remains around the expected value of one dollar, even pointing regularly above it when demand warrants.

However, we identify an event of a sharp drop in the rate in April 2017 corresponding to the announcement made on April 17, 2017. At that time, Tether announced that it would be unable to make deposits and withdrawals through its Taiwanese banking partner, making it very complex, if not impossible, to convert a USDT into USD.

At the origin of this “blockade”, a number of American banks, including Wells Fargo, who do not wish to maintain a relationship with the bank as long as Tether remains their customer. A lawsuit will be opened between Tether and Wells Fargo, which will then be dismissed.

After a short period of panic in the markets, lacking an alternative and needing a stable wedge to secure their positions, investors returned to the USDT despite greatly eroded confidence, and the asset returned to its target value of one dollar.

Too big to fail?

The market, in great need of a stable corner, will prefer to look at the situation with optimism and will no longer specifically sanction the USDT.

Even when it will be proven that $850M have been seized by the US authorities as well as several other jurisdictions, Bitfinex will easily succeed in raising $1 billion from private investors for the creation of the LEO token to compensate its losses.

This fund raising will even be profitable in the end, as the value of the LEO token is estimated at $1.2 billion.

Even when it will be proven that $850M have been seized by the US authorities, Bitfinex will easily succeed in raising one billion dollars.

So Tether seems “too big to fail”. Representing 80% of the valuation of the Stablecoin market and almost the entire volume, it remains an indispensable asset for speculators who need to have an asset that allows them to quickly rebalance their positions in a relatively stable currency.

The entire market prefers to turn a blind eye to the weaknesses of Tether’s model for fear of seeing it collapse like a house of cards. Cynical observers can easily draw a parallel with the classical economic model based on debt management.

 

Read more:

Bitfinex is constantly Printing More Tether but never burns

 

Buying Tether (USDT) is not much different than buying any other cryptocurrencies.
Like many of them, you can purchase some no Exchanges with other cryptocurrencies or buy them with Credit Card.
But first, let us explain to you where you can store your Tether (USDT).

Where to Buy & Trade Tether(USDT)?

Tether (USDT) Digital Wallets

The easiest solution for holding Tether (USDT) is in a hot wallet or exchange offering the coin.
In the list of exchanges supporting Tether (USDT), you can find:
– Binance
– OKEx
– Huobi
– KuCoin
– Kraken
– etc.

If you do not like holding Tether (USDT) on an exchange, you can always choose to store them in a wallet.

Below you can find different wallets supporting Tether (USDT):

Tether (USDT) Exchanges

You can buy, sell and trade Tether (USDT) versus other cryptocurrencies on most of the classic exchanges, such as Binance, OKEx, Huobi, KuCoin and Kraken.
The list is infinite.

Buy Tether (USDT) with Credit Card

Tether (USDT) can be acquired by crediting US dollars to Tether Limited. They will then issue the equivalent number of USDT to your wallet address.
Please note that this process is rare and mostly reserved for companies as Tether Limited will be asking you for a Verification Fee of 150 USDT.

The second way to acquire Tether with a Credit Card is to buy it directly from Binance.

buy and trade tether on binance
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The information above contains information on the cryptocurrency market, which is associated with high risks. These materials are presented for informational purposes only and in no way should be construed as a recommendation for the purchase or sale of the assets. Any person considering trading digital assets should seek independent advice on the suitability of any particular digital asset.

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