When most people hear the term “Cryptocurrency”, they often associate it with highly volatile and risky digital assets. This is true for cryptocurrency, but not for stablecoins. Tether is one example of a cryptocurrency that acts as a stablecoin. Its value has always been pegged to the US Dollar. In this article, we’re going to go back to the basics and explain what is Tether USDT, and why it might be a good idea to track its volumes traded.
What is Tether USDT?
Tether is a company that releases stablecoins backed by the US Dollar, Gold, and the Euro. Tether is mostly known for its USDT stablecoin, which is by far the most liquid and well-established stablecoin. According to Tether, the USDT is backed by a basket of assets, made up predominantly of US Dollars. The company is often involved in controversies, mostly involving the transparency of its backing of the USDT.
Despite those controversies, Tether claims that it converts cash into digital currency. This is made to anchor its value to the price of national currencies like the US dollar, the Euro, and the offshore Chinese yuan. They also claim that every Tether token is always 100% backed by their currency reserves. This includes traditional currency and cash equivalents and may include other assets and receivables from loans made by Tether to third parties. Every Tether token is also 1-to-1 pegged to the dollar, so 1 USD₮ Token is always valued by Tether at 1 USD.
Why does Tether have Legal Controversies?
The CFTC recently fined Tether “for making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin”.
Tether, since its inception in 2014, has claimed that its USDT tokens are backed 1:1 by the USD and Euros. But, the company misrepresented these claims from Jun 01, 2016, to Feb 25, 2019, by changing the wording to “equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts. CFTC found that these claims weren’t true. Also, Tether wasn’t backed for most of the time.
Should you Buy Tether USDT?
Since USDT is pegged to the United States Dollar, this means that capital appreciation can’t be achieved. You won’t make any money, nor lose any by simply holding this token. On the other hand, holding USDT has a great benefit in the current volatile crypto markets.
Because USDT is pegged and its value doesn’t change, this can be a great way to hedge the market’s price fluctuation during tough crypto price swings. Instead of holding your cryptos through falling markets and watching your crypto portfolio decrease, swapping to USDT can help keep your gains or stop you from losing.
For example, assume you have USD 1,000 worth of Bitcoins. If Bitcoin’s value is decreasing, your portfolio will definitely fall as well. Swapping to USDT will keep your portfolio’s worth to USD 1,000 (of course, minus the fees of swapping).
Why Should you Always Track USDT’s Volatility?
Whenever the crypto market crashes, most crypto traders and investors tend to swap to USDT to hedge the decreasing prices. That’s why stablecoins’ volumes increase during such events. Those crypto traders are waiting for the crash to end, to buy back their favorite cryptos.
With Tether being the biggest stablecoin by market cap, its traded volume is a good indicator for crypto market trends. When the crypto market is crashing, its volume traded increases and the market cap as well. On the other hand, when the crypto markets are up, its market cap decreases, and volumes become lower.
How to Buy Tether USDT?
Most crypto exchanges offer Tether USDT as a cryptocurrency. We at CryptoTicker recommend the following exchanges, as they proved to be solid companies:
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