Tether [USDT]: Information, How to Buy and Prediction
If you have been into cryptocurrencies since 2017, you might already have your account on at least a few top crypto exchanges like Bitfinex, Binance, and Bittrex. But what you might not have noticed, especially if you are not from the US, that these exchanges do not allow US Dollar deposits. However, they do have markets which are USD denominated.
So, how are these crypto-only exchanges which do not allow USD deposits are able to offer crypto trading in USD? One word answer- Tether [USDT]! If there was an award for the most controversial cryptocurrency, Tether would have definitely been the top contender.
In simple words, it is a modified digital version of US Dollar. But while there are U.S. Treasury and the Federal Reserve Bank for printing and controlling the supply of USD, there is no such mechanism for USDT. The company behind this 9th most popular cryptocurrency as per CoinMarketCap prints USDT out of thin air as and when needed.
But what Tether really is? Should you invest in it? All of this and much more in this beginner’s guide on USDT.
What is Tether [USDT]?
Tether or USDT is also popularly known as “stable coin”. This is because the tokens are designed in a way to ensure that they maintain their value irrespective of whether the crypto market is rising or falling.
As per its official website, every single USDT is pegged to reserves in fiat USD on a 1:1 basis and the cash reserves for the same are maintained by the organization in their bank accounts which are yet to be disclosed. The company claims that they create and destroy the tokens on the basis of the deposits and withdrawals they receive.
Just like many other cryptocurrencies, Tether is an ERC-20 token which you can buy, sell, and use for buying other cryptocurrencies from exchanges. Moreover, the tokens can also be pegged to many other different fiat currencies. While USDT is the most popular, there is also EURT (Euro Tether) available. Tether backed by Japanese Yen is expected to release soon.
How Does Tether [USDT] Work?
The reason for Tether [USDT] being a cryptocurrency is the fact that it was initially released through Omni Layer, a protocol of the Bitcoin blockchain. As the token is pegged to US Dollars, it is fairly stable and can be relied upon for shorting, longing, or hedging in crypto trades.
For instance, if you’ve made some profits from a cryptocurrency but fear that the market is about to fall now, you can convert that profit in USDT as it maintains its stability irrespective of the market condition.
This feature of Tether is what makes it one of the most popular cryptocurrencies for individuals as well as businesses. Apart from this, it also offers a few important benefits-
Support for infrastructure
Fairly easy setup
Fees for Tether [USDT] Transactions
The fee is another major benefit with Tether. If you are sending USDT from a Tether wallet to another Tether wallet or even Tether compatible wallet, the transaction cost is ZERO. However, if you want to send USDT to your bank account, you’ll have to pay $20 or 10-basis point whichever is greater.
Who Founded Tether [USDT]?
This is where things get super interesting.
There is no denying the fact that Tether has a powerful use case. If there is one thing that is confirmed in the crypto markets, it is its volatility. The value of coins can move significantly within a matter of minutes. The availability of a stable cryptocurrency like Tether is ideal to protect yourself from such wild fluctuations.
A precursor to Tether, named as “Realcoin” was announced by co-founder Brock Pierce in July 2014. In November 2014, Reeve Collins, CEO of the company behind “Realcoin” announced that the project is being renamed to “Tether”. The official website of Tether claims that it is headquartered in Hong Kong and has offices in countries like Switzerland. However, there is no detailed information about their location.
However, the Paradise Papers leak in 2017 confirmed that Giancarlo Devasini and Philip Potter, two senior officials of the popular Bitfinex crypto exchange were behind incorporating the Tether Holdings Limited in 2014 in British Virgin Islands.
Other names like JL van der Velde, Matthew Tremblay and Stuart Hoegner are also common between Bitfinex and Tether Holdings Limited. As a matter of fact, you can check this in the “About Us” page on the official website of Tether and Bitfinex. This resulted in the Bitfinex-Tether controversy where the exchange was accused of pumping the crypto market by printing fake Tether tokens (more on this controversy below).
Price Fluctuations of Tether [USDT]
As per CoinMarketCap, the current value of 1 USDT is $0.99 with a 24-hour trading volume of $1,952,610,000 and a total market cap of $2,702,860,357, making it the 9th largest cryptocurrency.
As for the circulating supply, unlike most other cryptocurrencies, there is no upper limit on USDT as it is issued on a 1:1 basis with US Dollar. If more people want to buy USDT, Tether Holdings would just print more USDT. Currently, the total supply of USDT is 3,080,109,502 and its circulating supply is 2,707,140,346 USDT.
The idea behind the creation of USDT is to offer stability to the crypto investors and businesses. As a result, the price of USDT intentionally remains close to 1 USD. As soon as Tether Holdings receives USD for buying USDT, they create new USDT to maintain this price. If someone wants to withdraw their USD, the company claims that it destroys the required USDT so that the price remains constant.
In short, price fluctuation is not something that you could expect from Tether. It was 1 USD a year ago and still trading around the same price.
Tether [USDT] Controversies
As soon as it was found that the founding members of Bitfinex and Tether Holdings Limited were same, accusations started pouring in where thousands of people from the crypto community and even several experts claimed that Bitfinex and Tether Holdings manipulated the price of Bitcoin in 2017.
There are reports on websites like TetherReport.com that claim that up to 50% of price appreciation that Bitcoin saw in 2017 was due to the fake pumping done by printing large quantities of Tether. Practically, this “Tether Effect” is actually possible.
Tether Holdings can print USDT as and when they want. While they claim that every new USDT is backed by USD, there is no evidence that can back their claims. So, they could simply print USDT, send it to Bitfinex and then place buying orders for BTC to surge its price.
Tether Holdings has time and again claimed that they are a transparent company and they don’t mind auditors auditing their accounts. However, as per an official statement from Tether, In January 2018, the company dissolved their relationship with an auditing firm Friedman LLP as they believed that the auditing firm was undertaking excruciatingly detailed procedures for auditing their balance sheets.
As soon as this was announced, people started accusing the company of not having adequate USD reserves for completing the audit. However, Freeh, Sporkin & Sullivan LLP, has recently audited their bank accounts and has confirmed that Tether’s assets exceed the balance of the fully-backed USDT currently in circulation. The detailed report can now be found on Tether’s official website.
Should You Invest in Tether [USDT]?
While Tether is probably the most controversial cryptocurrency, there is no denying that it is also one of the most stable. Despite the controversies, Tether [USDT] has been able to maintain its value. So, to the main question- Should you invest in Tether?
The thing is, USDT is able to retain its price irrespective of the controversies or even when Bitcoin climbed to $19,000 and its current fallback up to $6,100 is its high liquidity. But if anything happens to USDT, this liquidity mat can easily be swiped up to a major extent. Even if nothing really happens to USDT, it’ll probably always be surrounded by suspicion which could cause major dislocation in future.
Most investors who want to invest in cryptocurrencies do so for earning enormous returns. But USDT is not really that kind of cryptocurrency. It is created to mimic the price of USD and the price of 1 USDT would never reach $10 or even $2 as it is backed by fiat USD.
So, while you can switch to USDT for short-term if you believe that the crypto markets are about to fall, it is not really a kind of long-term investment that could generate massive returns.
Where to Buy USDT?
USDT is available on almost every top exchange. If you already have an account on any of the top exchanges, you’ll probably find several USDT-crypto pairs. Some top exchanges include-
After buying USDT, make sure that you transfer it to the official Tether wallet which you can download after creating an account on Tether’s website. You can also find several other wallets that are compatible with USDT.
At the end of Tether
It is digital currencies like Tether that have brought much of the disgrace to the crypto landscape. While there is no proof to confirm the Tether-related controversies, until now there was no proof to back the claims of Tether Holdings too.
While USDT can be a safe haven when the crypto market is volatile, it is not really the best choice for a long-term investment. If you are looking for a solid cryptocurrency backed by a great project and team, there is no shortage of such currencies now. Prefer such currencies over Tether as they’d probably not keep printing their currency on a whim to fulfill their ulterior motives.
Image via Shutterstock
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