June 8, 2021

Green tether logo with black font

Understanding The Stable Coin Tether (USDT)

Tether plays a role in the collection of cryptocurrencies called stablecoins. These coins to keep cryptocurrency valuations stable, conversely opposing the massive price fluctuations in the popular coin realm. Offering storage value and a good medium for trading other currencies.

Tether specifically belongs a group of fiat-collateralized stable coins. This means that it attempts to mirror the current circulation of Fiat coins on a national level. Aiming to keep pace with the USD or Japanese Yen for example. There are other stable coins that are centered around crypto-collateralized coins. They operate in a similar way but instead base prices of the national reserves reported by financial institutions.

The specific design for tether was to act as a bridging currency for perfomring trades. Making price a pretictable outcome for those who are in the midst of an entry or exit strategy.

Similar to an account that pays interest, USDT can afford some investors valuable staking opportunities at a rate much higher than that of fiat currencies. Investors can "lend" their USDT as part of a liquidity fund that pays competitive interest rates to help the coin perform its function. Rather than mining, investors are able to earn income by helping the currency perform what it was designed for.

Controversy in the Midst of Stable Growth

In late 2017 the USDT was alleged to have been hacked. This was later dispelled and has ceased investigation. Later in early January 2018 they hired an audit firm to perform an audit on real world reserves and compare them with Tether. There were accusations that surfaced after the audit firm was later let go by Tether. Rumors surfaced of a lack of transparency. 

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A New York attorney general later accused iFinex Inc, the parent company of Tether Ltd. and operators of Bitfinex of concealing a total aggregate in losses of around $880 million dollars of investor money. Public record states that this was for liquidity purposes and that nearly $700 million was moved in an attempt to recover investor funds.

The company issued a statement saying that "[The filings] were written in bad faith and are riddled with false assertions. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers."

The road has been rocky and there have been some foul play that was accused and thoroughly examined. Tether has stayed the course in its goal to remain stable and has been a valuable service for investors when the market is at its least predictable.

Tether FAQs

What Is Tether Used For?

Tether is a common tool used by regular traders to bridge volatility when performing trades and transacting. Arguably the biggest benefit to trading and pairing with USDT is that if used often, will eliminate a host of fees that can come when trading regular fiat currency like the USD.

How Do I Buy USDT?

Tether tokens can be bought on a number of exchanges. Some of the most popular exchanges are those that carry a variety of digital assets. these include Binance, CEX.IO, Kraken, BITIRA and for more popular coins, Coinbase.

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What Is the Point of the Tether Token?

Tether (USDT) offers a way for investors to avoid the extreme volatility of other cryptocurrencies. By moving value to USDT, a trader might reduce their risk of exposure to a sudden drop in the price of cryptocurrencies. It is also much quicker and cheaper to transfer BTC into Tether rather than the U.S. dollar.

How Does Tether Stay at $1?

Tether has dipped below the $1 mark in the past. However, likes its name, it was able to tether the price to a short lease and recover quickly. This is because there is a dynamic price relation to the number of fiat currencies in circulation is parallel to that of USDT.

Closing thoughts

As far as stable cpoins go, they offer convenience for investors who are trading often and wish to hold something with little volitility when forming the next trade or transaction.

Investors who are looking to earn some passive income from holding these coins can enter a staking program.

Staking Tether Could be a good Strategy for the Risk Averse Investor

As we remarked in the opening paragraph, staking is a viable option for those who wish to be paid for their holdings. Similar to a dividend that can not be taken away unless manually  removed by the investor. Staking interest rates are calculated on a daily basis and payout regularly. Those holding modest positions can earn some passive income by simply treating their holdings like a savings account.

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Nathan Rosevear

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