Everything You Need To Know About Tether (USDT)
Cryptocurrency and top-level stablecoin Tether are among the most recognizable names in the market today. From questions regarding how the USDT works, to how a stablecoin works, the controversy regarding it, and whether or not it’s a good idea to look into Tether, we’ll be answering all of them in this post.
What Is Tether?
Tether may already be a household name for a lot in the crypto game, and everyone else may have already heard of it, but what exactly is it? Tether is the third-largest digital coin by market value, and it sets itself apart from another big-name cryptocurrency because it’s a stablecoin.
Tether was launched in 2014. It’s one of the very first stablecoin to have been made and aimed to stay on a fixed 1:1 exchange rate with the U.S. dollar. Tether was the pioneer of the fiat-collateralized stablecoin model, which has become the most widely used stablecoin model today. But what exactly is a stablecoin, and why is it different from other coins?
What Are Stablecoins?
With the rise of cryptocurrency, the main problem was that not everyone wanted to deal with the volatility of the values of each coin. Cryptocurrencies like Bitcoin and Ethereum—despite already being relatively stable amongst other coins—were still too risky for people who didn’t want to deal with the high-risk, high-reward tendencies.
With this came the birth of Stablecoins. Stablecoins were made to counter the volatility of cryptocurrency by providing a convenient way for crypto enthusiasts, traders, and enthusiasts to preserve their fiat value without having to sell their crypto and cash out of the market.
What Is The Point of Tether?
As a stable coin, Tether aims to make sure that there’s a way for crypto enthusiasts to avoid the extreme volatility of other cryptocurrencies if they want a way to just store their money without having to monitor it for a while.
Tether helps with payments, trading, and lending. Because it’s still a cryptocurrency, all the benefits like easy, anonymous transactions at low costs remain. Trading your crypto for Tether instead of selling it is also an easier way to keep your crypto without turning it into cash.
The Tether Controversy
In May of 2021, Tether broke down the reserves for its stablecoin. They revealed that only 2.9% of their holdings were in cash, and the rest was in commercial paper. This would place Tether as one of the biggest holders of commercial paper in the world, and this is concerning for some.
To add, some believe that Tether may have been used to manipulate bitcoin prices. In 2021, The New York attorney general’s office settled with Tether and Bitfinex after they were accused of moving hundreds of millions of dollars to cover up their losses of more than $850 million U.S. Dollars.
Tether Takeaway
Tether is a great way to hold your cryptocurrency without dealing with possible big-time losses. However, some also see it as the potential black swan for the cryptocurrency market, so staying cautious is important.
With all of the things considered, it’s definitely a great option for holding your crypto, but experts advise that people won’t be earning more or even the same as what other cryptocurrencies may earn you.
This post is for educational and entertainment purposes only – THIS IS NOT FINANCIAL ADVICE!
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