Cryptocurrencies are the most exciting technological advancement of the decade regarding our financial system. They offer many different ways to use our money and expand its use, but that comes with a few problems. Cryptocurrencies are still volatile assets that can react heavily to market movements. The other problem is that due to the same volatility, we still cannot altogether remove fiat cash from the use, since that would destroy price stability everywhere. People had to find a way to connect the use of cryptocurrencies with the stable value of fiat currency like the dollar. That is how the idea of Stablecoins came to be. Stablecoins are cryptocurrencies tied to the value of a fiat currency, such as the U.S. dollar or the Euro, and they allow for more price stability when using cryptocurrencies.
Tether USDT is a stablecoin issued by the Hong Kong company Tether Limited controlled by the owners of Bitfenex. Tether is a currency pegged to USD by having all of its tokens in circulation backed by a sum of commercial paper, fiduciary deposits, cash, reserve repo notes, and treasury bills reserve.
The purpose of USDT is to combine the unrestricted nature of cryptocurrencies, which can be sent between users cross-border without a trusted third-party intermediary, with the stable value of the U.S. dollar.
Tether’s value is guaranteed to remain tethered to the U.S. dollar, making USDT unique. Tether claims to allocate the exact USD amount to its reserves whenever it distributes new USDT tokens, ensuring that USDT is fully backed by cash and cash equivalents.
This property makes USDT a haven for crypto investors: they can place their portfolio value in Tether during periods of high volatility without cashing out into USD completely. Furthermore, USDT enables a simple means to exchange a U.S. dollar across the world via blockchain without relying on a slow and expensive intermediary like a bank.
The USDT stands for United States Dollar Tether, Tether being the company behind it. USDT use cases are:
The price of USDT at the time of writing (April 2022) is $1, with a market cap of $82.2B. It is ranked #3 on the cryptocurrency by market cap list. It also has a 24h trading volume of $63.5B, showing us the great demand it has.
It is worth noting that the price of USDT can always go a few cents up or down due to the peg with USD. This mainly happens when there are significant market fluctuations regarding the USD.
USDT does not have a cap on the number of tokens. Since a private company issues it, they decide how many of the tokens are in circulation. USDT in circulation corresponds to the USD sum stored in their treasury in commercial paper, fiduciary deposits, cash, reserve repo notes, and treasury bills reserve.
The demand for cryptocurrency’s most popular stablecoin, USDT, is constantly growing.
It is available for purchase in many ways, with essentially infinite supply since new tokens are created only when users want to exchange their USD for USDT.
The primary way people buy their USDT is through centralized exchanges because they offer the ability to purchase them with credit\debit cards, which most people prefer.
Although significantly more complicated, the second way is through decentralized exchanges such as Uniswap. Decentralized exchanges usually require users to already have some cryptocurrencies in their wallets to buy other cryptos.
Finally, it can be purchased easily through a broker app such as our Veli App, where you can get your hands on some USDT in just a few taps on the screen.
USDT was formed in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars.
In addition to being available on Ethereum, USDT is also available on the Bitcoin, EOS, Tron, Algorand, Solana, Avalanche, Bitcoin Cash (SLP), and OMG blockchains.
USDT has not had any major early investors or backers to start the project, apart from its parent company Bitfenex.
USDT has had its fair share of lawsuits, legal battles, and accusations.
For over five years, Tether allegedly issued unbacked USDT tokens. Bitfinex would later purchase Bitcoin on the open market to increase its price during market plunges.
According to the complaints, this caused the total market capitalization of cryptocurrencies to skyrocket to $795 billion in late 2017.
Bitfinex was under investigation by the New York Attorney General, Letitia James, in 2019. Tether gained notoriety as a result of the exchange’s association with it. The case centered on alleged cover-ups totaling $850 million for a loss. Tether’s lawyer revealed that the cryptocurrency was only 74% backed around this time.
Tether was able to reach an agreement with the state of New York. Under the settlement agreement terms, Tether was forbidden from conducting business in New York. Although Bitfinex and Tether did not confess wrongdoing, they were fined $18.5 million by the court.
The court also asked Tether to provide quarterly reserve reports for the next two years. There have since been more major and minor lawsuits regarding Tether and Bitfinex.
USDT is the most popular stablecoin on the market, and the growth is not slowing down. Here are some numbers to better illustrate that.
USDT’s biggest competitors are USDC and BUSD.
USDC is a stablecoin created by Circle and Coinbase Exchange. It started gaining popularity when USDT’s legal issues surfaced in public. It is still significantly smaller than USDT, but it is gaining popularity fast.
BUSD is a stablecoin created by Binance and Paxos. It offers the same utility as USDT and USDC, but as the native token of Binance, BNB, it is also mainly centered around the Binance exchange products.
Here are some numbers to further illustrate the competition.
|Tether||USD Coin||Binance USD|
|Total number of wallet addresses||22.32m||7.74m||266.3k|
|Total number of daily active users||50.6k||509k||845|
|Total number of new addresses created daily||14.1k||9.1k||406|
|Issued by||Tether||Centre Consortium|
(Circle and Coinbase exchange)
The most popular stablecoin out there. Currently facing many regulation problems, but still by statistics, the most used stable asset in cryptocurrencies.
USD Coin was launched in 2018 by Circle and Coinbase through a joint company called Centre Consortium. The two stablecoins offer equivalent functionality. If there is a distinction between the two, it is transparency. USD Coin is wholly funded with U.S. dollars, and its reserves have been audited publically. Tether’s proof of funding hasn’t been audited, and there are several unanswered questions.
The 2nd biggest competitor for USDT is BUSD. BUSD is the youngest coin of all three, founded in 2019 by Binance and Paxos. Binance USD is also a fiat-backed stable coin like USDT. Another difference is that BUSD is mainly used with Binance exchange related products.
As with any other asset class, there are risks involved when it comes to investing. Since there are many kinds of cryptocurrencies, risks can be grouped into two categories – general risks that apply when investing in cryptocurrencies and risks that only apply to specific assets.
We have prepared a guide that addresses general cryptocurrency investing risks and offers tips on how to mitigate them, while risks that only apply to specific assets are addressed directly in the coin guides such as this one.
As the largest stablecoin, USDT has been under pressure to publish frequent reports on its reserves to demonstrate that it can keep its peg to the dollar. The core guarantee that dollar reserves back every USDT somehow satisfies enough people to make it vital for the crypto trade.
It is so frequently utilized that it trades more than its whole market capitalization in a single day, indicating that it is a focused trade currency. USDT is the most used and widely accepted stablecoin.
USDT remains the number one stablecoin by market capitalization, increasing its demand. USDT is excellent for sending and exchanging funds cross-border, and if you want to stay in the crypto loop, you can hold your money in USDT tokens.