What Is Tether (USDT)? How it Works & Where To Buy It?

Tether (USDT) was created by cryptocurrency exchange Bitfinex. The Tether token is pegged at a 1:1 ratio will the US dollar – which classifies it as a stable coin.

The Tether price has a stable value and the Tether’s reserves are backed by an equivalent U.S dollar amount. The dollar reserves need to be equal to the number of tether coins in circulation to maintain stability and eliminate volatility.

The native token of the Tether network is publicly traded as USDT. Tether, trading as USDT, is commonly available on most local and international exchanges.

How USDT Works

USDT tokens are pegged to the U.S dollar which is collectively known as a “fiat currency“.

The current market cap of USDT is more than $80Bn – making it the 3rd largest cryptocurrency in the world.

Tether tokens were developed by the crypto exchange Bitfinex in 2016.

Developers of Tether (USDT) recognized the need for stability in the crypto market – bridging the gap between fiat currencies and cryptocurrencies in a transparent way. Simply put, Tether tokens are digital cash equivalents that make them appealing to individuals who seek to avoid major swings in the market. Individuals seeking security and minimal volatility opt to buy Tethers.

Tether also lends itself to being an appealing option for money transfer because of its price stability and cheap transaction fees. Sending Tether via the TRON network takes only a few minutes and costs $1.

It should be noted that Tether Ltd. makes no guarantee that USDT can be traded for the U.S. dollar equivalent.

What Is USDT Used For?

Tether is traded to Bitcoin and most other cryptocurrencies because of its stability. This means that when you sell Bitcoin (or another cryptocurrency) for Tether, the amount you receive in USDT, and its value, doesn’t fluctuate. Whereas a volatile cryptocurrency could depreciate drastically overnight.

Tether tokens are a convenient way to trade crypto, as opposed to depositing cash for trading each time which would be costly and time-intensive. It’s also the most popular choice for liquidity. Tether simplifies this by allowing individuals to trade crypto whenever, without needing to deposit cash each time.

Another use of USDT is for money transfers – send money quickly and without the risk of it losing value by the time it reaches the recipient because it has a stable value. This is one of the most popular uses of USDT.

The stability of Tether tokens makes it extremely convenient for money transfers and trading in the crypto market. Crypto markets can be extremely volatile and traders seek stability in tough market conditions, that’s where traders opt for Tether USDT. If market conditions look uncertain, crypto investors often choose to trade their cryptocurrencies for USDT to avoid a sharp depreciation in their assets.

Any investor aims to maximize profits and minimize the risk of loss, trading into USDT for periods can help investors avoid being subject to losses or the event of an impermanent loss.

The entire concept of stable coins was brought about as a means for investors to have more accessibility and control in the crypto market. By trading cryptocurrencies to USDT, individuals have the opportunity to realize the profits they’ve made on their trades.

Once an individual has USDT it is relatively simple for them to either cash out (exchange USDT for U.S. Dollars deposited into their bank account) or wait until they are comfortable with the market conditions and ready to purchase an asset like bitcoin or other cryptocurrencies.

It’s very common for individuals to keep a large portion of their portfolio in USDT during a bear market (market decline of 20% or more) for two main reasons – they avoid a sharp decline in volatile assets they owned and because bear markets are great opportunities to buy cryptocurrencies at lower prices.

Most investors choose to keep a portion of their portfolio in USDT so that they can take advantage of any buying opportunities in the market when they arise.

Where To Buy USDT?

Now that you’re familiar with what USDT tokens are used for, let’s look at where USDT can be bought. Individuals are required to use fiat currencies to buy Tether tokens on a crypto exchange.

The following crypto exchanges are safe places where you can buy, sell, transfer and store USDT and other cryptocurrencies.

Five of the most popular crypto exchanges are:

1. Binance (US Customers use Binance.US)
2. Gate.io
3. Coinbase
4. KuCoin
5. Bitfinex

After using a fiat currency to purchase Tether tokens, the tether tokens will reflect in your personal USDT digital wallet (which is stored and can be accessed on the crypto exchange). Individuals can use their debit or credit card to purchase USDT on a crypto exchange of their choice.

The Tether price is pegged to the U.S dollar but exchanges still charge fees and have varying exchange rates.

How long has USDT existed?

Tether USDT has been around since 2014 and was originally called RealCoin before being rebranded as Tether in 2016. In recent years Tether has grown to support other traditional fiat currencies including the Euro (EUR₮), Chinese Yuan (CNH₮), and gold (XAU₮).

The first trading of USDT started in 2015 and trading has grown rapidly since then. Tether daily transactions peaked at more than 1,000,000 transactions in a single day on May 10th, 2021.

What’s controversial about USDT?

There has been a large amount of controversy surrounding USDT. Let’s take a look at 3 of the top controversies surrounding Tether.

1. United States Department of Justice Investigation – In mid-July 2021, the Department of Justice launched an investigation into Tether regarding suspected bank fraud. The claims were that Tether officials failed to mention to banks that transactions were linked to crypto.
2. Accused of Inflating The Bull Run Of 2017 – Tether failed to conduct an audit in 2018, to prove that its digital assets were backed by fiat currencies. This led to speculation, and the company was accused of artificially inflating the massive bull run of 2017.
3. New York Attorney General Investigation – Bitfinex and Tether were investigated after failing to inform their clients and the market about certain USDT tokens that were allegedly not backed by the US Dollar. The dispute was later resolved but caused significant controversy. Tether later produced an audit that proved that the tokens were backed by actual assets.

How many USDT are there?

There is currently 80.88Bn Tether in circulation.

The number of Tether has risen significantly in the past few years, the more fiat currency is used to purchase USDT, the more the amount of USDT in circulation increases.

Essentially, the ratio needs to always be 1:1. This means that to achieve a balance between cash reserves and USDT tokens, tokens will be minted accordingly.

In theory, the Tether price should never be worth more or less than the dollar price – but that has not always been the case. In 2020, the Tether price briefly reached $1.06 – in 2018, following negative news it slumped to $0.90 for a very short time.

Can you mine USDT?

It’s not possible to mine USDT. The most common way individuals acquire USDT is by buying USDT on an exchange.

The main reason Tether can’t be mined is because it would diminish the integrity of Tether, which is an asset-backed stable currency.

Only the company behind Tether can mint (create) new USDT.

What is the market cap of USDT?

The market cap of USDT is currently $80,57Bn.

USDT Market cap = total amount of coins in circulation x $1

Eg. 80,570,000,000 x $1 = $80,57Bn

The market cap of USDT has grown in recent years, as more Tether tokens have to be minted and entered into circulation.

Biggest Competitors Of USDT

The success of Tether works to its advantage and disadvantage. It’s gained immense popularity and more than 50% of Bitcoin is traded to USDT.

However, it’s also inspired the creation of more stable coins. The creation of digital currencies has been a prolific advancement in our history, but the creation of stable coins has helped to increase crypto adoption. It’s deemed more secure and less risky.

Traditional currency pegged directly as a stable coin has been adopted by many companies, which has led to the creation of the USD coin (USDC), Binance USD (BUSD), and a few others. The abovementioned stable coins are among the most traded. TerraUSD (UST) is a notable example of what happens when a stablecoin loses its peg.

What are the future plans for USDT?

The future of any digital currency is expected to involve exponential growth, and Tether is no exception.

It has become extremely popular for money transfers because of its price stability. Tether continues integrating with other blockchains, which make it available to be transferred on different networks – USDT can be sent on the bitcoin network through the Omni layer protocol.

Tether’s claims to continue complying with audits indicate the company’s intent to make Tether as transparent as possible. Tether is currently the most used stable coin in the world and achieved a peak daily trading volume of $279 billion on May 19th, 2021.

Crypto investors continue to include Tether in their portfolio of crypto assets because of its stability and convenience. When crypto markets are volatile, many crypto traders opt to keep a large percentage of their portfolio in Tether.

Pros and Cons of USDT:

Tether differs from volatile cryptocurrencies because it’s a stable coin. Let’s take a look at the pros and cons of Tether.

Pros:

• Stable Price – Tether is pegged to the dollar and doesn’t appreciate nor depreciate in price value as other volatile cryptocurrencies do.
• Fast Money Transfer Method – Tether Transactions only take a few minutes, which makes it a popular choice for transferring money. It also maintains a stable price which means there isn’t a risk of it depreciating by the time it reaches the receiver.
• Available On Most Crypto Exchanges – USDT is among the most popular cryptocurrencies available today. It is readily available on almost every exchange, making it easy to purchase for anyone.
• It’s Backed By Fiat Currency – Tether price is kept stable because it is backed by actual assets. This maintains the price and integrity of Tether.
• Protects Individuals Against Volatility In The Market – When market conditions are extremely volatile Tether acts as a safe haven for traders, allowing them to trade into Tether and not be affected by a crashing market.

Cons:

• USDT Can’t Be Mined – Tether can’t be mined and the only way to buy USDT is directly through Tether Limited or cryptocurrency exchanges that support Tether.
• Not Profitable To Invest Only In USDT – Because Tether is a stable coin it won’t yield the same returns that volatile cryptocurrencies do. However, individuals can lend Tether out to receive yields. This is risky and due diligence should be used.
• It’s Surrounded By Controversy – Tether USDT has been subject to multiple investigations and has been surrounded by bank fraud allegations. In the past, there has also been some doubt regarding whether Tether USDT is backed by actual assets. Many of these allegations have been retracted and disputes have been resolved but not without damage being done to tether’s reputation.
• Lacks Anonymity – Individuals seeking to purchase Tether are required to make a bank deposit in most cases, which exposes their identities and puts their sensitive information in the hands of companies. It’s possible to acquire Tether without submitting any identification. Many exchanges don’t require proof of identification to open an account. Individuals can also opt to use a peer-to-peer network (P2P) to buy Tether.

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