Tether (USDT): What It Is, What It Is Worth, And Should You Invest?

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Cryptocurrency is constantly in the news, as well-known financial institutions and companies add Bitcoin to their balance sheets. Recently, the less volatile assets within cryptocurrency – stablecoins – have also hit investors’ radar. The most popular stablecoin is tether (USDT).

What is tether?

Tether is a blockchain-based cryptocurrency backed by the US dollar. This means that when financial institutions act as collateral, dollars are actually held in reserves. Stable coins, when fully backed by the dollar, have a 1: 1 relationship with the USD. You can expect stablecoins to remain stable, as the name suggests, unlike their popular cryptocurrency counterparts, Bitcoin and Ethereum.

Understand stablecoins

The stablecoin sector aims to avoid volatility and allow cryptocurrency to be a store of value rather than value risky investment. Stable coins also provide liquidity in a volatile cryptocurrency market where it is difficult to switch back and forth between cash and a cryptocurrency like Bitcoin.

The most famous stablecoins are USD-backed cryptocurrencies such as Tether, Gemini Dollar and USD Coin. However, other stablecoins use different types of collateral. Some are hedged with fiat currencies like euros or yen, others with commodities like gold and silver.

Good to know

Despite the 1: 1 ratio of the popular USD stablecoins, there are usually minor fluctuations in the price of stablecoins. Most of the time you will find that stable coin values ​​can have a difference of 1 to 3 cents. This is mainly due to changes in liquidity, as well as supply and demand, driven higher or lower by transactions, trading volumes and market volatility.

It’s important to keep in mind that some companies are less transparent than others about how much of their stablecoin is actually covered by fiat currencies and commodities. Tether himself was embroiled in controversy over his false claims and lack of full support.

History of the Leash and Controversy

Tether started as Realcoin in 2014 and the first tokens were distributed on the Bitcoin network in 2015. It was one of the earliest cryptocurrencies and one of the first successful stablecoins. Not only was it technologically revolutionary, it also had a list of reputable founders, including Brock Pierce, director of the Bitcoin Foundation.

However, once it did succeed, skepticism and controversy ensued, which is not surprising given the scope of testing the coin received as the first popular stablecoin. Tether had to overcome some controversy to keep his position at the top:

Key events:

  • Bitfinex: Tether saw early success when it was listed on the Bitfinex exchange. However, further research by researchers found that both companies had the same management – both companies had the same CEO and CFO – and identical governance structures.
  • Bitcoin pump: It appeared that Tether was artificially pumped into the cryptocurrency market to create liquidity and was a driving force behind Bitcoin’s bull run of up to $ 20,000.
  • The 2017 hack: Approximately $ 31 million of Tether was stolen in the 2017 hack, forcing Tether to build a hard fork.
  • USD backing controversy: An audit of the dollar reserves that was supposed to take place in 2017 was never conducted. The audit was intended to ensure the reserves were being maintained, but Tether instead separated from the auditors.
  • Hide losses: In 2019, New York Attorney General Letitia James accused Tether’s parent company of hiding a loss of $ 850 million by diving into Tether’s currency reserves. Beginning in 2021, Tether has resigned itself to James and agreed to pay $ 85 million and stop trading with New Yorkers. Even so, Tether admits no fault and claims it just wants to get on with the business.GBR_Logo

Tether’s new support policy now includes both loans and USD. Despite this change and previous controversy, new tether tokens will continue to be minted as demand continues to grow. Currently, the market capitalization of USDT is $ 34 billion, down from $ 3 million two years ago.

Think before you invest in tether

Tether can be bought on most major cryptocurrency exchanges. However, given the story and the prospect, should you invest? Despite many problems in the past, Tether continues to be a very stable cryptocurrency that is stronger to overcome its problems for the most part unscathed.

Although competitors have popped up over the years, tether is still the most popular stablecoin and is widely used for trading, lending, and interest income. Tether could potentially be seen as one of the riskier cryptocurrencies, largely due to its transparency issues, but it is still very important in the cryptocurrency world and is unlikely to be going anywhere.

Where to Buy Tether and Earn High Interest

You can buy Tether on many major cryptocurrency exchanges and lending platforms. Most pay between 6% and 12% interest just to save Tether on their platform. Tether will typically earn more interest than other popular stablecoins like GUSD, USDC, and DAI due to its high demand for commercial and cryptocurrency loans.

Likewise, you can charge higher interest rates for tether at KuCoin, a cryptocurrency-based peer-to-peer lending platform. In fact, it is the cryptocurrency that has by far the highest interest rates – averaging 30% to 60% – compared to GUSD, USDC, Bitcoin, and Ethereum.

Make sure you understand whether you are investing or not Tax law about cryptocurrency. Income in the form of cryptocurrency can be taxed whether it is earned as interest or capital gains.

Below are some platforms and their tether rates.

platform USDT APY
Block fi 9.3%
Celsius 10.51%
Nexus 10%
Youhodler 12.7%
Binance 6%

Is Tether a Good Investment?

With the creation of Tether and other stable coins, it is quick and easy to exchange any cryptocurrency for Tether, while converting a cryptocurrency to cash would take days and cost transaction fees. This creates liquidity for exchange platforms, creates free exit strategies for investors and increases the flexibility and stability of investor portfolios.

In addition, Tether can be sent worldwide much faster and with lower fees than transfers from traditional banks and financial institutions. While most people wouldn’t use Bitcoin or Ethereum for shopping and daily transactions due to their high volatility, it makes perfect sense to use Tether.

For these reasons and more, it is still worth investing in tether. While Tether isn’t necessarily a long-term investment that will make your money grow on its own as it stays pegged to the US dollar, there are lending platforms, exchanges, and wallets that will pay you high interest rates for storing USDT on their platform.

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About the author

Brenda Zhang is a technology, finance, and game writer with over a decade of writing experience and too many blogs to count. She worked in Biology labs, psychology labs, tech startups, and large corporations. She’s a San Francisco-based software engineer by day and an interdisciplinary writer by night. She combines her seemingly independent experiences in different areas in order to gain new knowledge.

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