Interesting information to know about Tether

Fredrick Awino
15.08.2022
283 Views

Tether is among the top stable coins that pioneered the digital token space concept. Tether Limited Inc. was launched stable coin in 2014. It is also referred to as USD₮. Besides, USDT is among the first cryptos to peg its market value to the fiat currency. In reducing the friction of real currency in the crypto ecosystem, USDT valued each of its tokens at $1.

WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.

Tether is backed with commercial paper reserves and fiat. Through Tether Limited approval, one can switch between Tether and USD. The strategy helps in keeping the stable coin peg. However, the issue has resulted in a lot of controversies as some people argue that it is not fully collateralized.

The Way Tether Works

Tether is designed to be a stable coin, which is pegged on real-life commodities or assets. It is very unique as its aim is to offer stability in value, especially in volatile markets. However, even though the tokens of Tether is pegged on the US dollar, USDT does not have its own blockchains like other cryptos like Bitcoin and Ether. Therefore, initially, it was launched on the Omni Layer of Bitcoin. Bit with time, it has expanded to other protocols such as Bitcoin Cash, TRON, Solana, and Liquid Network.

As of August 2022, USDT was the third largest crypto after Bitcoin and Ether. Its market cap is $66,432,597,138 and the price is $1.00. This means that 1 tether can be traded for $1 irrespective of the market conditions. Most traders prefer this crypto since it offers steady and reliable liquidity in getting and out of other crypto trades. With this, it does not face unpredictable gains or losses from volatile price changes.

In understanding why Tether was introduced, you should know that its main aim is giving cryptos the chance of being a store of value instead of being a risky investment. In addition, its goal is to avoid volatility.

Why You Should Invest in Tether

Tether as a stable coin may not make sense as an investment as it is not meant to increase in value. However, it mainly operates as a store of value. This is because 1 USDT is equivalent to one dollar. Apart from Tether being a store of value, it is a tool for conducting businesses.

In USDT, there are high chances that you will know the price tomorrow. However, for other cryptos like Bitcoin, it is difficult to predict. For instance, the price of a Bitcoin today will not be the same tomorrow. This issue makes it challenging to create pricing schemas for firms mainly based on BTC.

Moreover, you should trade in USDT because of its widespread adoption. The reason is that its tokens provide smart alternatives to fiat currency. For instance, it promotes digital wallet applications, exchanges, decentralized finance projects as well as payment services.

Tether is available in varied currencies. It supports the euro, US dollar, Chinese Yuan, British Sterling Pound, and Mexican Peso. Besides, it is represented by ₮ and examples include USD₮, MXN₮, EUR₮, GBP₮, and CNH₮. Furthermore, apart from being transparent, it has the best customer support. The customer support team is usually available 24/7.

As an investor, USDT gives you the opportunity of transacting without fiat currencies. For instance, if you need to send someone money, you can send the USDT instead. Also, you should invest in tether as most of the crypto community trusts it. This makes it to be among the top stable crypto in value.

USDT is available in most of the crypto exchanges. The issue makes it easy to sell or buy when there is a need. Another benefit is that Tether has low transaction fees and fast transaction times.

Limitations of Investing in Tether

Despite having available customers support that are always ready to help when one needs assistance, Tether us indivisible. This issue limits its functionality. Besides, in the past, there have been some accusations that Tether is used in manipulating Bitcoin’s price. Some people also believe that it is utilized in laundering money for criminal activities. People believe so as it is easy for investors to exchange USDT units with US dollars.

Moreover, Tether has made very little effort in making its inner workings accountable or transparent to the public. This has been a concern for most of the USDT holders. The reason is that they are not sure whether their investments are secure or not.

Tether suffers from Counterparty risk. The company has been on record saying that the Tether holdings do not offer legally enforceable rights to U.S dollars for the holder. The users also rely on the relationship of Tether with banks. This is outside of the U. S’s high set standards.

USDT has unclear regulatory as well as banking relationships. Since its existence, it has shifted from one regulatory jurisdiction and banking partner to another. This issue raises concerns about the legal standing and legitimacy of the project.

Quick Facts About USDT

  • Tether is a stable coin and its aim is to pursue a steady valuation
  • It is the most popular as well as a widely traded stable coin
  • USDT was founded in 2014 July as Real Coin and the first token was issued in 2014 October.
  • USDT does not have its own blockchain, instead, it exists on TRON, EOS network, Bitcoin Liquid Layers, and Ethereum
  • Tether supports different currencies including the Chinese Yuan, Euro, and U.S dollar
  • It is the third most valuable crypto across the globe
  • There is no professional audit of the reserve holdings of USDT that has ever been completed.
  • Some traders accuse it of manipulating the prices of Bitcoin

 

Author Fredrick Awino

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