Tether (USDT) is one of the most popular cryptocurrencies in the world and it has been expanding over the last years. Compared to other digital assets, Tether is special and different. Indeed, this is the largest stablecoin in the world, meaning that its price is pegged to another fiat currency, in this case, the U.S. dollar.
There are many use cases for Tether that have been helping users over the last years. Of course, there have also been some issues related to the way this virtual currency was backed. However, it is now the third-largest virtual currency in the market after Bitcoin (BTC) and Ethereum (ETH).
What is Tether (USDT)?
Tether is one of the most popular digital assets in the world and it can be used for several things. Individuals have been mainly using it to trade against other virtual currencies in exchanges that didn’t have support to fiat currencies such as the U.S. dollar or the Euro (EUR).
Tether has a stable price. This is why this virtual currency is considered to be a stablecoin. The virtual currency is being traded always close to $1.00 and the fluctuations that affect this virtual currency tend to be almost inexistent. Of course, there were some moments where USDT lost its peg but it recovered it very fast.
Furthermore, there are many services that are already accepting Tether in order to reward users with interest rates. The USDT is then lent to other traders and investors that are interested in using this cryptocurrency.
For each USDT in the market, the company behind Tether, iFinex, holds an equivalent value of U.S. dollars. Although some of these funds may not be held in cash, each USDT should be backed 1:1 by U.S. dollars.
Tether in the Cryptocurrency Market
A few years ago, Tether was a small player in the crypto market. It was among the top 25 digital assets but with a small market capitalization. Nevertheless, over time, it grew until it was able to reach a higher position with a higher valuation.
Nowadays, Tether has a market capitalization of $9.18 billion and a trading volume of $18.69 billion. This is currently the cryptocurrency with the largest trading volume in the world, even more than Bitcoin. This is due to the fact that Tether can be traded and exchanged for different virtual currencies rather than only with Bitcoin.
This has increased USDT value and transaction volume over time. At the time of writing, Bitcoin has the second-largest volume in the world with $15.79 billion, followed by Ethereum (ETH) and Litecoin (LTC) with $6.27 billion and $1.41 billion respectively.
The main question is whether Tether’s treasury will continue printing and issuing more USDT over time and how this can be sustainable for its price. This takes us to the next topic about Tether and its controversies that affected it over the last years.
As the market expanded and Tether gained popularity, there have been some issues that affected USDT’s credibility among the crypto community and external investors. The main issue was related to whether Tether’s treasury really had enough funds to back all the USDT issued to the market.
This controversy has already been settled considering they have presented all the necessary documentation to prove they have enough funds to back all the USDT issued and in circulation.
Another controversy was related to market manipulation. The cryptocurrency market is very volatile, we know it. However, there were some analysts that suggested that new USDT were issued to sustain Bitcoin’s price. The theory suggested that as Bitcoin’s price fell, USDT worked as a digital asset to reduce Bitcoin’s falls and help it remain afloat.
This theory has also been debunked considering that when the market falls, it is a natural moment for investors that were outside the market to buy BTC in a strategic way. Many investors prefer to buy and sell BTC when it falls rather than when it remains stable.
In the future, there may be new controversies and issues with Tether and how this digital asset could continue growing in the market.
Tether became one of the most popular and recognized stablecoins in the market. There are now new competitors but none of them was able to reach the current levels and valuation that USDT touched. This virtual currency can be very useful to trade against other virtual currencies and also to hedge against volatility in the crypto market.