Tether (USDT) is one of the most widely used stablecoins. It was created with the intention of having a one-to-one exchange rate with the US dollar. The coin can be found on a variety of blockchains and has seen increased trading volumes and liquidity in recent years.
USDT, like other stablecoins, is excellent for cryptocurrency trading since it eliminates the market volatility that is typical with BTC and other crypto assets. When using stablecoins, the extra fees and delays of switching between crypto and fiat currencies are also eliminated.
Introduction
Tether is an important component of the bitcoin community. Tether is the world’s fourth-largest cryptocurrency, with a market worth of about $20 billion as of December 2020, trailing only Bitcoin, Ethereum, and XRP. Furthermore, it frequently outperforms Bitcoin as the coin with the biggest daily trading volume.
But what exactly is Tether, and how can it help you?
Tether (USDT) is a cryptocurrency.
Tether (USDT) is the first stablecoin in the world (a cryptocurrency that mimics the value of a fiat currency). Bitcoin investor Brock Pierce, entrepreneur Reeve Collins, and software engineer Craig Sellers first published it in 2014 under the moniker Realcoin.
USDT was first issued using the Omni Layer on the Bitcoin protocol, but it has subsequently migrated to other blockchains as well. In fact, as the chart below shows, the majority of its supply is held on Ethereum as an ERC-20 token. TRON, EOS, Algorand, Solana, and the OMG Network are among the various blockchains on which it is issued.
Tether, like many of the world’s leading cryptocurrencies, has had its share of accomplishments and scandals.
The price of USDT has been quite variable, especially in its early days, going as high as $1.2 at one point. However, since early 2019, the coin has seen significantly less volatility. This is most likely due to a continual increase in its trading volume and the overall growth of the cryptocurrency markets.
How does it work?
The value of stablecoins, as opposed to more standard crypto assets, lies in their relative stability. Tether’s attraction as a stablecoin stems from its tethering, or pegging, to fiat currencies. At first, the USDT was claimed to have been tied to the US dollar, with one dollar stored for every USDT in circulation.
According to the original Tether whitepaper:
At the same time, each tether unit placed into circulation is backed by the matching fiat currency unit held in deposit by Hong Kong-based Tether Limited in a one-to-one ratio (i.e., one Tether USDT is equal to one US dollar).
Tether’s original one-to-one asset was USD, but it has now evolved to include holding collateral in the form of various real-world cash equivalents, assets, and loan receivables.
The coin usually trades at a consistent one-to-one rate with the USD.
What is the significance of Tether (USDT)?
Tether is a cryptocurrency that acts as a bridge between crypto and fiat currencies. It offers investors a simple option to get a one-to-one USD trade without the inherent volatility of other cryptocurrencies.
Investors can own a digital asset that functions similarly to a fiat currency, but with the added benefit of being able to trade it for other coins on the crypto markets. Tether’s fundamental characteristics make it a popular coin, but it is not without risk.
Characteristics
Continuity (as much as the USD can be considered stable)
Various blockchains are supported.
As opposed to regular cryptocurrencies, there are a variety of applications.
The Advantages of Tether (USDT)
Market stability can be reached quickly.
You can trade swiftly to USDT instead of trying to cash out if the price of Bitcoin or other crypto assets is rapidly plummeting.
It’s simple to transfer money between exchangers.
You can instantly transfer your funds between exchanges using Tether. This is also beneficial for trading arbitrage with other coins.
Trade on exchanges that solely accept cryptocurrency.
Some exchanges don’t accept fiat deposits or withdrawals, but they do enable USDT trading. You can trade on these exchanges without having to worry about the market volatility that comes with putting your primary trading funds in BTC (or other cryptos) at first.
Trading in the style of the forex market
Because USDT is pegged to the US dollar, you can trade like a Forex trader by exchanging local (non-US) currencies into USDT when their value versus the US dollar is high. When the local currency falls in value, you can cash out or exchange it for other assets.
How do I keep a tether? (USDT)
USDT can be stored in a variety of crypto wallets. Web and mobile wallets (such as Trust Wallet), as well as cold storage hardware wallets (such as Ledger) via third-party software wallets, are examples.
Because USDT is issued on a variety of blockchains, you’ll need to be sure you’re sending and receiving it on the same one.
So be cautious. You risk losing your money if you use the wrong network. If you try to send Omni USDT to an ERC-20 USDT address, for example, your transfer will almost certainly be lost.
Note that the ERC-20 USDT is the sole kind supported by Ledger as of December 2020. This means that USDT, which is based on the Bitcoin blockchain (Omni Layer), is not transferable to Ledger hardware wallets.
Other coins backed by Tether
Tether also has several stablecoins besides USDT:
EURT is a Tether cryptocurrency that is tied to the Euro.
The tether coin is tied to the Chinese Yuan (CNHT).
XAUT is a physical Tether coin that is tied to gold.
Tether’s Transparency page shows how much of each coin is circulating on several blockchains.
Conclusions
Stablecoins have brought a lot of simplicity to the crypto trading market because they eliminate the need for traders to convert fiat currency and crypto several times. As a result, USDT is a useful asset to have on hand when trading cryptocurrencies.
While there have been some doubts regarding the reserves’ legitimacy, the volume over the last few years indicates confidence in Tether’s worth as a stablecoin. Other stablecoins, such as BUSD, USDC, TUSD, and PAX, can be used instead of USDT.
