Tether – USDT is the world’s biggest stablecoin to date. All USD Tether tokens in circulation are backed by the U.S. Dollar on a 1:1 ratio. But is this claim valid? The popular stablecoin has endured a lot of controversy and criticism. Find out more in this article.
Tether is a stablecoin that launched in 2015, as it was introduced on the trading platform Bitfinex. Tether – USDT is originally designed to always be worth $1.00. It maintains its peg to $1.00 by adding a new real US Dollar each time a tether is minted. Meaning dollars are in reserves at financial institutions and are used collateral.
Stablecoins are cryptocurrencies that have their price pegged to or backed by a stable asset, or group of assets. Stablecoin plays an important role in transactions, payments and settlement, and Decentralized Finance – DeFi.
This review of Tether (USDT) was created for informational purposes. This article is not intended for promotion.
Tether – USDT is on the blockchain. Meaning their transactions will be recorded in a way that uses an immutable cryptographic signature to eliminate or minimize the risk of hacking or cheating the system.
Tether – USDT can be traded and transferred to almost all blockchains; Ethereum, Binance Smart Chain, Avalanche, Polygon, Arbitrum and many more…
Yes, Tether can and has blacklisted some addresses in the past. If law enforcement asks them specifically to freeze accounts, Tether will do do so. To check out the blacklisting feed visit this twitter account that posts new USDT blacklistings.
USDT’s stability is quite reliable historically speaking, as the stablecoin has always managed to remain steady at around the $1 mark. It achieves this price stability through collateralization of buying and selling the ‘real’ assets. Volatility can ofcourse occur, but the price has always returned to its original value of one dollar.
Controversy has rised surrounding Tether’s claim that it has enough dollar reserves for its current circulating supply of Tethers.
On 2014, Brock Pierce, Reeve Collins, and Craig Sellars launched Realcoin in California. which would rebrand into Tether later that year. Tether Holdings Limited was founded by Bitfinex Chief Strategy Officer, Phil Potter and Giancarlo Devasini . JL Van de Velde took on the roll of CEO of Tether-USDT besides his functiono as CEO of the Bitfinex cryptocurrency exchange.
Tether is one of the oldest cryptocurrencies and one of the first successful stablecoins. USDT rose very quickly and with this came the skepticism and controversy.
Initially, Tether was listed on the Bitfinex exchange, but the identical management of Tether and Bitfinex, was for some critics worrysome. We take a look at some highlighted controversies;
Feel free to do your own research about Tether controversies as the list is longer then described here…
Tether claims that every USDT is backed 1:1 by U.S. dollar in its reserves. But the reality is a lot more nuanced. In 2021 Tether published their reserves breakdown. Indicating that Tether had 75.85% in “cash and cash equivalents.” Where 65.4% here-off is in commercial paper and only 3.87% is in cash. Meaning the claim of 100% US dollar backing is false.
The chart above indicates that Tether is in reality backed by;
We look at two general use-cases of the stablecoin Tether – USDT;
Trading pairs refer to assets that users can trade for one another through an exchange. These allow buyers to compare the costs of various digital assets.
For instance, a BTC/USDT crypto pair will let you know how many USDT equals one BTC.
If you have Tether – USDT and want to trade it, you can check for the pairing on the exchange. You may find different pairs on different exchanges. The most liquid trading pairs for USDT will be located at top exchanges such as Binance or Huobi.
Lending or yield farming in DeFi offers you an interest when lending your stablecoins to a borrower. Benefiting users that can get a loan at much lower rates than rates centralized exchanges offer. But there are also benefits for long-term investors, that can earn interest rates on the stablecoins they lend.
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Ongoing controversy around Tether makes it hard to say whether Tether, as a stablecoin, is totally valid. We therefore advise to manage your risk and hold for ‘a stable of horses’ instead of betting on one single horse.
Altough Tether is considered the original stablecoin with his biggest market share and third ranking of all cryptocrrencies, it is not the only of his kind. There are several other stablecoins, such as; DAI, USDC and BUSD.
There are a lot of red flags around the stablecoin, but the crypto has been backed by many exchanges, protocols and wallets. If Tether were to fall, there will be a lot of organisations that lose interest and reputation. To minimize this risk, there will be a lot of money ready to back Tether, in worst case scenarios.
Time will tell the true nature of the Tether claims…
Despite the controversies and criticisms Tether – USDT is ranking as the third biggest cryptocurrency worldwide. Tether can be used for trading, loaning and earning interest and will be forever remembered as the first stablecoin that made stablecoins popular.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.
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