Tether: Useful asset or liability?

Tether: Useful asset or liability?

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Jonathan
Jonathan

An editor at Coincrop


09 Jun 2022 | 21 min read
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any, if not thousands, of cryptocurrencies are available on the market. Each has unique features, and each aspires to become the next Bitcoin. Although there are some popular alternatives to Bitcoin, a particular virtual currency named Tether is causing quite a sensation in the cryptocurrency market.

What is Tether, and why is it such a big issue in the cryptocurrency industry? Are you thinking of purchasing Tether? Let's look at how Tether functions, why it's so prominent, and why you want to utilize it rather than genuine US dollars.

In this guide:

 

What is Tether?

Tether is a stablecoin, which is a sort of cryptocurrency. Stablecoins are intended to be tied to a particular currency, the US dollar, in the instance of Tether's flagship USDT token. Tether says that each coin is supported by a dollar stored in reserves; the coin's price is kept steady by bots purchasing and trading anytime it varies from the dollar.

Tether is designed to function as every time a person puts a US dollar into Tether's balance, Tether Inc, the firm operating Tether mines one Tether in exchange.  Whereas the pricing of many other digital currencies fluctuates frequently, the value of Tether is generally equal to $1. It's not always the situation, and fluctuations in the price of Tether have previously alarmed traders.

Cryptocurrency traders frequently use Tether to purchase cryptocurrencies as a substitute for the US dollar. It effectively allows investors to take refuge in a much more reliable asset amid periods of high volatility in the cryptocurrency industry. Nevertheless, cryptocurrency is unregulated. And many institutions refuse to trade with cryptocurrency exchanges due to inherent uncertainty. That is where stablecoins step in.

Cryptocurrencies like Tether provide a recognizable medium of exchange suitable for the cryptocurrency industry in the volatile virtual currency marketplace. Therefore, it implies that, like every other virtual currency, USDT can be saved in digital wallets, traded for products and services, dealt with among persons, and utilized in almost any situation where cash is used.

What is the history of Tether?

Tether, previously referred to as Realcoin, is a cryptocurrency that currently trades as USDT and was introduced in 2014 by Tether Operations Limited. It is a subsidiary of Bitfinex, a Hong Kong-based crypto exchange. It is a stablecoin, which are cryptocurrency tied to real-world assets or resources to maintain value consistency and minimize currency fluctuations. It shares the majority of its managerial staff with the crypto exchange Bitfinex.

Its creators came up with the concept of Bitcoin-like digital money with no price fluctuations. According to the coin's initial white paper, Tether is made to lift over the benefits of conventional cryptocurrencies. It comprises capabilities like international operations and the capacity to trade with no need for a third party's participation.

How is Tether created?

Unlike many other cryptocurrencies such as Bitcoin, Tether is not "mined." Tether Limited alternatively produces new units and distributes them through the cryptocurrency exchange Bitfinex when fiat cash is placed in its reserves. The Tether can be purchased on the majority of cryptocurrency exchanges.

How can Tether keep its peg?

Briefly said, Tether is supported by a centralized stock of assets that support up the amount of every coin. This 1:1 matching is what keeps the value of Tether from decreasing or growing on the public markets.

A stablecoin's resource can be as fundamental as a savings account, wherein physical money is stored as security for the produced coins. Nevertheless, as of 2022, more than 80 billion USDT coins exist. Consequently, expecting Tether's holdings to contain $80 billion in cash is unrealistic. Even Apple, among the wealthiest corporations in the world, has just about $200 billion in available capital. Instead, Tether's holdings contain just a tiny portion of the money, the remaining of corporate bonds, treasury notes, or other assets.

In principle, any USDT investor might demand that their assets be redeemed in US dollars. Nevertheless, coins are only purchased and exchanged through a massive crypto exchange. Because these operations typically involve millions of dollars, individual users are supposed to buy and sell their assets on these platforms alternatively.

To conclude, stablecoins aren't highly unpredictable, unlike regular cryptocurrencies. They are naturally stable and resistant to market volatility because they enforce the principle of a 1:1 reserve. However, there is always some vulnerability in owning stablecoins. If reserve assets become inadequate or non-existent, the linkage to the US currency may disintegrate. It might have a cascade effect, with bad opinions around the cryptocurrency causing the price to fall below the quantity kept in reserve.

How do I purchase Tether?

If you feel that Tether assets sound right for your financial objectives, you can easily purchase Tether. Selecting a crypto exchange is the first step in purchasing Tether. You may purchase and sell coins in an exchange. In the scenario of Tether, you will be able to acquire Tether tokens using your US dollar investments. The intricacy and costs of cryptocurrency exchanges vary. Evaluate many exchangers before choosing one for your Tether buy.

Once you've decided on your exchange, you can submit your first investment. Although Tether is a stablecoin that is not as unstable as Bitcoin and other digital currencies, your investment may lose its value. After the transaction is completed, you will be the owner and operator of Tether. However, if you spend more than $1 for 1 unit, including networking and exchange costs, you're probably getting a lousy bargain. Some options for exchanging US dollars into Tether are Binance, Kraken, and Crypto.com. 

Assume you wish to combine your Tether assets with other digital currencies. It's simple in such a situation. The Tether may be paired with other coins on the most controlled and decentralized platforms. Tether does not genuinely "pair" with other digital currencies because it is a stablecoin tethered to the US currency, but it continues to be a popular option to buy crypto to be active in the trades. Some places where you can quickly transfer your Tether to Bitcoin, Ether, and other prominent cryptocurrencies are Binance, FTX, and KuCoin.

Consider that you will be acquiring Tether through an exchange rather than straight from the blockchain. You may sell it or obtain it further after you've purchased Tether on a worldwide exchange. You could also wish to keep your crypto assets in a digital wallet. 

How do I store Tether?

Usually, coins or tokens get stored in a suitable wallet. Bitcoin offers various alternatives. It is a little more challenging for Tether's USDT in this sense. It is not your typical cryptocurrency or coin, even though you may save it in various wallets.

The first solution is to keep USDT in crypto exchanges and trading platforms. Putting trust in such third-party firms with one's cash is not recommended for lengthy periods, although it may be helpful when trading. Currently, all of the major platforms support Tether.

Keep in mind that moving cash from an exchange platform to the incorrect blockchain that supports Tether can be disastrous and lead to losses in assets. Conduct thorough research and ensure that you choose the suitable alternative.

A second possibility is to use mobile or computer wallets like Coinomi, MetaMask, TrustWallet, or a device wallet like Ledger. For this reason, every one of these choices is acceptable. It all boils down to choosing a wallet that works with your platform for USDT.

Why is Tether a concern?

Because Tether is a stablecoin, traders acquire it to secure themselves from instability in the cryptocurrency industry. The notion that it is linked to a real-world currency offers it a significant edge over other cryptocurrencies in reliability and valuation.

Bitcoin and Ethereum are not linked to any real-world assets. As a result, most cryptocurrency investors purchase Tether to protect their economic condition if the cryptocurrency market falls someday.

Tether, on the other hand, has had its share of problems. Tether Limited has officially stated that every USDT coin is guaranteed one US dollar in its holdings ever since the token's launch. Nevertheless, it did not provide any clear proof to support this statement. The corporation has refused to attend an independent audit of its assets for several years, fueling yet more doubt in the cryptocurrency industry.

More significantly, in 2019, Bitfinex., Tether Ltd.'s parent organization, alleged attempting to conceal a $850 million loss by seizing approximately $700 million of Tether's cash holdings and utilizing it to compensate investors. It was uncertain whether any wrongdoing had occurred, while Tether fiercely denounced it in court documents. As per the corporation, the funds were taken and stored.

Tether allegedly got hacked in 2017, and over $31 million in coins were taken. Following this occurrence, the corporation did not conduct an audit to determine that it had adequate reserves. The corporation even proceeded to start firing its audit staff, followed by the issuance of a subpoena. Tether's contentious past has also resulted in squabbling banks and financial organizations. Tether Limited, formerly a client of Wells Fargo, has switched financial partners several times in recent years. 

Tether's credibility has suffered dramatically in recent years. The stablecoin is still active and trading, and while its value occasionally deviates from $1, it does not vary much and remains a stable cryptocurrency, at least for the time being.

Should I invest in Tether?

Tether and other stablecoins make little sense as investments as their value is not expected to rise. Because one USDT must always equate to $1, they solely function as a store of wealth. In addition to becoming a great store of wealth, Tether acts as a means for making deals in a considerably more accessible way than Bitcoin.

If you want to retain your cash in cryptocurrency but minimize volatility, a stablecoin like USDT is an excellent option. The Tether may be a decent investment for specific cryptocurrency traders. It's an ideal solution for stability when seeking a means to enter and exit other cryptocurrency deals.

Although the organization claims to have never missed fulfilling a redemption request from one of its authenticated clients, nothing about investing or cryptocurrency is certain. Investors of cryptocurrencies should also be conscious of the evolving regulatory environment surrounding crypto assets.

How much can I earn from Tether?

There are a number ways in which you can earn a return from your Tether depending on your risk appetite and investment complexity.

The following table lists centralised saving organizations that will pay a rate of interest on Tether assets on a flexible terms basis:

OrganizationDeposit assetsReward assetsAPY Rate
Cashaa

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

20.0% - flexible

Amon

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

18.8% - flexible

Pillow

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

17.8% - flexible

Finblox

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

15.0% - flexible

Pintu

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

15.0% -

0-10000 USDT, flexible

MyConstant

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

12.5% - flexible

CoinLoan

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

12.3% - flexible

Yield App

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

12.0% - flexible

Wirex

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

12.0% - flexible

Coinchange

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

10.7% - flexible

The following table lists centralised saving organizations that will pay a rate of interest on Tether assets on a fixed terms basis:

OrganizationDeposit assetsReward assetsAPY Rate
OKEx

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

70.0% - fixed (7 days)

AAX

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

20.0% - fixed (7 days)

Cashaa

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

20.0% - fixed (365 days)

AAX

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

16.0% - fixed (14 days)

Cashaa

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

16.0% - fixed (180 days)

AAX

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

14.5% - fixed (360 days)

Cashaa

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

14.0% - fixed (90 days)

AAX

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

13.3% - fixed (180 days)

CoinDCX

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

13.1% - fixed (7 days)

BTSE

Saving

Deposit TetherTether (USDT)

Earn TetherTether (USDT)

12.5% - fixed (365 days)

Conclusion

Tether is a popular virtual currency, rendering it among the most well-known names in the cryptocurrency industry. Despite a few scandals, the crypto asset and its firm have been established to be a relatively secure and reliable cryptocurrency. That is owing, once again, to the notion that it is linked to the value of current fiat money. Unlike Bitcoin, it is not vulnerable to wild market movements.

Tether is quite prominent and can be purchased on any crypto exchange platform.  It can be a nice beginning point if you want to be in the cryptocurrency world.

Tether FAQs

Yes, presumably. On the other hand, Tether Limited exclusively deals with significant institutions and businesses like crypto exchanges. If the quantity you want to swap is less than $100,000, you should trade your assets on an exchange platform such as Coinbase. You will get precisely one dollar for each coin, less any exchange costs, typically approximately 0.2 percent.

Tether did lose its peg on several occasions throughout its early days. Nevertheless, rising use and universal acceptance have recently enabled the peg to retain stability at $1. But, as a basic guideline, stablecoins should not be regarded as a secure long-term investment. A black swan occurrence might result in such assets losing their peg to the US dollar.

The Tether may trade at $1.1 per unit rather than $1 on specific regional markets. It might be owing to a supply-demand mismatch, in which merchants pay extra for a limited, declining local distribution. The disparity is particularly pronounced in locations where US money is often scarce, such as in several developing nations.


Jonathan

Jonathan

An editor at Coincrop
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Jonathan is a Crop Crop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.


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