Tether Price Prediction for 2021: USDT Business Risk Investigation

Tether forecast: H1 2021
Price: $$ 1.01- $ 0.97
Price drivers: market sentiment, trust, possible regulation
Tether forecast: 1 year
Price: $ 1.03 – $ 0.95
Price drivers: market sentiment, trust, possible regulation
Tether forecast: 3 years
Price: $ 1.03 – $ 0.90
Price drivers: corporate risk, possible regulation

Tether – forecast overview

Tether has quickly become one of the most popular stablecoins and, interestingly, is also the highest-traded cryptocurrency in terms of volume on all exchanges.

What sets Tether apart from other cryptocurrencies is that it is something called a stablecoin, which means that its value is tied to something else. The most common is the US dollar (USDT), but other currencies are also available.

Stable coins aren’t actually something you want to invest in, but rather bridge currencies that you can use to move money around. However, many people hold free funds in stable coins like USDT and that is something that we need to look closely at.

In the interests of a Tether (USDT) price prediction, we need to examine both the potential movements of the USD and the underlying risks associated with the cryptocurrency and the actual Tether Holding LTD company. However, the main focus is on how far the USDT can move from its peg, the USD.

It’s also worth noting why you might want to use a sturdy coin like Tether. Cryptocurrency exchanges are traded in pairs, e.g. B. BTC / USD. When trading in USD, these exchanges must follow various regulations. Given the different countries and laws this exchange must work with, some are choosing to simply use USDT instead.

The other benefit of USDT is that the transactions are much faster. As most people know, sending fiat using the traditional SWIFT system is very slow and expensive. Transferring USDT is quick and very cheap, which makes it a far better option for most cryptocurrency traders.

For the most part, the USDT value is closely tied to the USD, but there are variations based on natural supply and demand. Overall, however, the value of the USDT is determined by movements in the USD. The same applies to other currencies.

It’s also worth noting that some questions are currently being asked about how Tether’s USDT is actually supported. In theory, 1 USDT should be covered by 1 USD. Critics of Tether suggest that the company operated a partial reserve system in which more USDT is spent than is actually covered by USD.

At this point it is unclear whether these reports are accurate. However, it highlights the fact that while USDT is a safe place to hold your funds, the reality is that there is significant asymmetrical risk.

In the short term, the main driver of the USD and USDT is the continued printing of money from the FOMC, which continues to devalue the currency that reltavizes others.

Since the onset of COVID in 2020, the USD has fallen 12% and this trend is expected to continue. With the FOMC showing no signs of slowing down and interest rates at record lows, the USD is expected to continue deteriorating.

We should expect the US dollar to fall below the 90.00 level over the next 12 months, as indicated by the US dollar index.

Tether price forecast for the next 5 years

The main factors that we need to continue to monitor are whether the entire sector is being regulated and whether we are getting more clarity from Tether Holding LTD about their actual reserves.

So far we have not had any real answers from the company about how their reserves work and there is clearly a real lack of transparency.

With that in mind, we should expect USDT to trade at a discount to the USD for extended periods of time. We saw discounts that were up to 10 cents and I think we could see that again.

If you are simply using USDT as a bridge to trade between different cryptocurrencies, then there is probably nothing to worry about. However, I wouldn’t hold cash in USD as I believe it isn’t a truly safe haven like its Fiat counterpart, the USD.

Regarding the main drivers of the USD over the next five years, the main factor is clearly what will happen to the FOMC and its policy changes.

When COVID hit, the FOMC and all private central banks around the world cut interest rates sharply and started increasing QE. The FOMC has been printing money faster and faster, raising debt levels to unprecedented levels.

This is having a significant negative impact on the USD and so far the only thing it will save is other countries doing the same as well.

The real driver of price will be how quickly the US decides to ease money printing again and how quickly it decides to raise interest rates. So far, FOMC Chairman Jerome Powell has suggested that this will not happen very quickly.

With this in mind, we are unlikely to see any significant appreciation in the USD either, so we should expect the US dollar index to continue falling.

Tether – corporate risk and partial reserves

The most important part of what happens to the value of USDT is clearly based on how much confidence there is in the company Tether.

As mentioned earlier, there is a lot of discussion about how actually the company’s reserves are measured. The belief is that 1 USDT = 1 USD with each tether covered by 1 USD.

The reality is that there is some evidence to suggest that it is not and that Tether is operating under what is known as a fractional reserve system. This means that there is less USD on the books than the value of the USDT that was minted.

The USDT is the most traded cryptocurrency by volume on all exchanges, suggesting that it is widely used. Traders may think that it has the same safe haven elements as the USD, but it is likely not at all.

If Tether has indeed presented themselves incorrectly, those who hold Tether are at significant downside risk.

When there is a loss of confidence that would lead to selling pressure when investors exit their tether holdings.

Tether – relationship with Bitcoin

Another interesting relationship that needs to be recognized is the fact that price moves in [[BTC]]correlate strongly with the amount of USDT in circulation. This is one reason skeptics believe the company coins more USDT than it holds in USD.

Many exchanges offer promotions with Tether giveaways or bonuses and it is believed that this will help prop up the price of Bitcoin.

Interestingly, Coinbase, which was recently listed on NASDAQ, is the only major exchange that Tether doesn’t use. Given that it will be the first to be officially performed, this is important. However, the fact that a publicly traded company must adhere to high regulatory standards and choose not to trade USDT should be worth considering.

Tether – FOMC devalues ​​the greenback

While the focus of this article is mostly on the relationship between USDT and USD, it is also worth taking a look at what is currently driving the entire greenback.

With the onset of COVID and the lockdowns that followed, private central banks around the world have taken drastic measures to stimulate the economy, led by interest rate cuts and massive monetary stimulus.

The FOMC in particular is a country that has been printing money rapidly under the banner of QE for more than a decade. The QE and bond purchase program began with the GFC. While the level of money pressures has changed, this is the first lever pulled when a crisis occurs.

Printing money leads to inflation and the net effect is a loss of purchasing power. This time most currencies and private central banks were equally affected due to the global crisis.

The main question is when rates will rise and the stimulus will end. Currently, there does not appear to be any plan on the part of Jerome Powell to stop what they did.

The government has no intention of ever repaying the debt, and virtually all countries are only servicing the debt.

In terms of the impact on the US dollar, the heavy debt burdens are almost enough reason to keep interest rates down, as a rate hike will in a significant way cause significant market damage.

Given that the US is inherently one of the most indebted countries in the world, this will put a cap on how far the USD can move in the years to come.

It will be incredibly unlikely that the USD will hit levels above 100 in the US dollar index in the coming years as the FOMC continues to detract from its value.

Technical analysis

USDT / USD – Daily Chart

If we look at the relationship between USDT and USD, we can see that the two, although pegged together, are still moving significantly in price.

In fact, during the COVID onset, we saw the relationship come out up to 1.01 or more during the day.

What happens when the markets fall is traders rush to sell the stake, such as [[BTC]]and convert it to USDT. This can lead to an increase in USDT demand in the short term and the price will deviate from the USD.

It is clear that the 1.01 level now will be resistance for the future and since this has really been the most significant market downturn we have seen in a number of years we should use this as a base.

Conversely, if there is a loss of confidence in the USDT and traders rush to move money from the USDT to the USD, it can result in a discount. We have seen discounts in the past, most recently at a price of 0.95-0.97.

For me, this is the kind of downside risk traders need to look out for. Regulation is a major driver, and if the ongoing rumors of the company’s real USD holdings are true, we could see a real flight into the safety of USDT.

If you’re using USDT as a bridge to quickly transfer money or just trade crypto, this should be fine and an OK option.

However, I would not hold any free funds in USDT as it clearly does not represent the same level of security as its fiat counterpart, the USD.

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