Traders Have A Valuable Resource In USDT As A Means Of Seeking And Protecting Profits

About Tehther (USDT)

USDT is a stablecoin (stable-value cryptocurrency) that mirrors the price of the U.S. dollar, issued by a Hong Kong-based company Tether. The token’s peg to the USD is achieved via maintaining a sum of commercial paper, fiduciary deposits, cash, reserve repo notes, and treasury bills in reserves that is equal in USD value to the number of USDT in circulation.

Originally launched in July 2014 as Realcoin, a second-layer cryptocurrency token built on top of Bitcoin’s blockchain through the use of the Omni platform, it was later renamed to USTether, and then, finally, to USDT. In addition to Bitcoin’s, USDT was later updated to work on the Ethereum, EOS, Tron, Algorand, and OMG blockchains.

The stated purpose of USDT is to combine the unrestricted nature of cryptocurrencies — which can be sent between users without a trusted third-party intermediary — with the stable value of the US dollar.

Stablecoins are increasingly used as an inflation hedge in recent times; compared to keeping fiat currency in a savings account averaging 0.06%, users can lend their stablecoins and earn yields ranging from 3% to as high as 20%. However, keep in mind that regulatory, platform risks and more entail.

The main special feature of USDT is that it is always worth one U.S. dollar. That makes it highly useful for storing or transferring value, as it is always worth the same price. Bitcoin, Ethereum, and other popular cryptocurrencies typically fluctuate in value based on market supply and demand. With USDT, it’s always worth a dollar by design.

The Tether parent company claims to hold assets equal to the total outstanding market value of its currency. That means it has a dollar in cash or highly liquid investment assets for every one USDT in circulation. If you trust Tether and its accountants in the Cayman Islands, that makes it a great alternative to regular USD for many purposes, including international remittances and trading crypto without converting back into dollars. But there are enough questions about Tether’s assets and motives that it’s essential to read the controversy section below before going all-in on USDT for your banking needs.

Who Are The Founders Of Tether?

USDT — or as it was known at the time, Realcoin — was launched in 2014 by Brock Pierce, Reeve Collins and Craig Sellars.

Brock Pierce is a well-known entrepreneur who has co-founded a number of high-profile projects in the crypto and entertainment industries. In 2013, he co-founded a venture capital firm Blockchain Capital, which by 2017 had raised over $80 million in funding. In 2014, Pierce became the director of the Bitcoin Foundation, a nonprofit established to help improve and promote Bitcoin. Pierce has also co-founded Block.one, the company behind EOS, one of the largest cryptocurrencies on the market.

Reeve Collins was the CEO of Tether for the first two years of its existence. Prior to that, he had co-founded several successful companies, such as the online ad network Traffic Marketplace, entertainment studio RedLever and gambling website Pala Interactive. As of 2020, Collins is heading SmarMedia Technologies, a marketing and advertising tech company.

Other than working on Tether, Craig Sellars has been a member of the Omni Foundation for over six years. Its Omni Protocol allows users to create and trade smart-contract based properties and currencies on top of Bitcoin’s blockchain. Sellars has also worked in several other cryptocurrency companies and organizations, such as Bitfinex, Factom, Synereo and the MaidSafe Foundation.

Understanding Tethers

Tether belongs to a breed of cryptocurrencies called stablecoins which aim to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum. That would allow it to be used as a medium of exchange and a mode of storage of value, instead of being used as a medium of speculative investments.

Tether specifically belongs to the category of fiat-collateralized stablecoins. This means that a fiat currency like the US dollar, the euro, or the yen, backs each cryptocoin in circulation. Other stablecoin categories include crypto-collateralized stablecoins, which use cryptocurrency reserves as collateral, or non-collateralized stablecoins. Non-collateralized stablecoins don’t have any collateral but operate in a way similar to that of a reserve bank to maintain the necessary supply of tokens, depending on the economic situation.

Tether was specifically designed to build the necessary bridge between fiat currencies and cryptocurrencies and offer stability, transparency, and minimal transaction charges to users. It is pegged against the U.S. dollar and maintains a 1-to-1 ratio with the U.S. dollar in terms of value. However, there is no guarantee provided by Tether Ltd. for any right of redemption or exchange of Tethers for real money – that is, Tethers cannot be exchanged for U.S. dollars.4

According to a study by CryptoCompare, a global cryptocurrency market data provider, bitcoin to Tether trading still represents the majority of BTC traded into fiat or stablecoin. In February 2021, 57% of all bitcoin trading was done in USDT.5 Tether remains a major source of liquidity for the cryptocurrency market.

Tether was launched as RealCoin in July 2014 and was rebranded as Tether in November by Tether Ltd., the company that is responsible for maintaining the reserve amounts of fiat currency.4 It started trading in February 2015.

How To Buy Tether

Tether is a unique coin in that it works on multiple blockchains. That currently includes Bitcoin (via Omni), Ethereum, Tron, EOS, Liquid, Algorand, SLP, and Solana.

The easiest way for most people to acquire Tether is through an exchange that supports USDT. As a popular stablecoin, you can find Tether at most major crypto exchanges. Just don’t pay more than a dollar per coin, plus network and exchange fees, or you’re likely getting a bad deal.

Wallets

Because Tether works with multiple blockchains and is widely used, you have a ton of options when it comes to storing your Tether. That includes software, hardware, and paper wallets. If you want fast access for buying and selling, it’s important to keep your Tether in a wallet that’s connected to an exchange. For long-term storage, any secure cryptocurrency wallet can keep your assets safe.

Transaction Times

According to Kraken, USDT transfers take place in as little as two minutes on the TRC2- blockchain and up to 40 minutes on the OMNI/Bitcoin blockchain.

Tether VersionProcessing TimeNumber of Confirmations
Tether USD (USDT) ERC205 minutes20 confirmations
Tether USD (USDT) OMNI40 minutes4 confirmations
Tether USD (USDT) TRC202 minutes20 confirmations

What Makes Tether Unique?

USDT’s unique feature is the fact that its value is guaranteed by Tether to remain pegged to the U.S. dollar. According to Tether, whenever it issues new USDT tokens, it allocates the same amount of USD to its reserves, thus ensuring that USDT is fully backed by cash and cash equivalents.

The famously high volatility of the crypto markets means that cryptocurrencies can rise or fall by 10-20% within a single day, making them unreliable as a store of value. USDT, on the other hand, is protected from these fluctuations.

This property makes USDT a safe haven for crypto investors: during periods of high volatility, they can park their portfolios in Tether without having to completely cash out into USD. In addition, USDT provides a simple way to transact a U.S. dollar equivalent between regions, countries and even continents via blockchain — without having to rely on a slow and expensive intermediary, like a bank or a financial services provider.

However, over the years, there have been a number of controversies regarding the validity of Tether’s claims about their USD reserves, at times disrupting USDT’s price, which went down as low as $0.88 at one point in its history. Many have raised concerns about the fact that Tether’s reserves have never been fully audited by an independent third party.

What Is the Tether FUD About? Tether has been the target of a lot of FUD due to its murky balance sheet and lack of a public audit. The company has repeatedly been fined for misleading statements around the state of its books. After Tether released a first breakdown of its balances, it came under even more scrutiny from regulators over its claims that all issued stablecoins are fully backed by dollar reserves.

Even though a report supposedly cleared Tether from any allegations of wrongdoing, doubts remain. The company has been in repeated spats over its business practices, but most in crypto accept that Tether is, in a way, “too big too fail.”

Key Events

  • Bitfinex: Tether saw early success by being listed on the Bitfinex exchange, but further digging by researchers uncovered that the two companies had the same management — both companies had the same CEO and CFO — and identical executive structures.
  • Bitcoin pump: It seemed that Tether was being artificially pumped into the cryptocurrency market to create liquidity and was a driving force behind Bitcoin’s bull run up to $20,000.
  • The 2017 hack: About $31 million of Tether was stolen in the 2017 hack, forcing Tether to create a hard fork.
  • USD-backing controversy: An audit of its dollar reserves that was supposed to happen in 2017 never did. The audit was supposed to ensure its reserves were maintained, but Tether parted ways with the auditors instead.
  • Hiding losses: In 2019, New York Attorney General Letitia James accused the parent company of Tether of hiding an $850 million loss by dipping into the Tether currency reserves. As of 2021, Tether had settled with James, agreeing to pay $85 million and cease trading operations with New Yorkers. Despite this, Tether did not admit fault and claimed it simply wanted to move on from the matter. It says it has implemented a new backing policy that includes loans as well as USD.
  • Antitrust accusations: A class action filed in June 2020 accuses Tether of manipulating the markets by issuing USDT to itself without dollar backing, then selling the USDT to the Bitfinex exchange, which is Tether’s sister company, according to The Block. The case hasn’t yet been heard in court.
  • Reserves controversy: Bloomberg reported on Oct. 7, 2021, that a former banker with Tether alleged that company executives had invested reserve funds. Further investigation turned up evidence that Tether had made billions of dollars worth of short-term loans to large Chinese companies and made loans to other crypto companies that it had secured with Bitcoin. Tether called the report “a tired attempt” to undermine the company, according to Cointelegraph. But although a Tether spokesperson told Bloomberg that Tether has enough cash to match the largest one-day payout it ever has had to make, it didn’t confirm it is holding the roughly $69 billion it would need to back all the coins in circulation at the time.

Premium Tether Crypto 3D Illustration download in PNG, OBJ or Blend format

Where To Buy Tether And Earn High Interest Rates

You can buy tether on many major cryptocurrency exchanges and lending platforms. Many will pay anywhere from 6% to 12% in interest just for storing Tether on their platform. Tether will typically earn more interest than other popular stablecoins like GUSD, USDC and DAI because of its high demand in trading and cryptocurrency loans.

Likewise, you might be able to ask for higher interest rates for Tether on KuCoin, a cryptocurrency-based peer-to-peer lending platform. In fact, it is the cryptocurrency that commands the highest interest rates by far compared against GUSD, USDC, Bitcoin and Ethereum.

Whether or not you choose to invest, make sure you understand tax laws around cryptocurrency. Income in the form of cryptocurrency can be taxed, whether earned as interest or capital gains.

Below are some platforms and their Tether interest rates.

PLATFORMUSDT APY
BlockFi9.50%
Celsius8.50%
Nexo12%
Youhodler12.3%
Binance10%

Is Tether A Good Investment?

With the creation of Tether and other stablecoins, it is quick and easy to swap any cryptocurrency for Tether, while converting a cryptocurrency to cash would take days and cost transaction fees. This creates liquidity for exchange platforms, creates no-cost exit strategies for investors and adds flexibility and stability to investors’ portfolios.

Additionally, Tether can be sent anywhere globally much more quickly and with lower fees than transfers at traditional banks and financial institutions. While most people wouldn’t use Bitcoin or Ethereum for purchases and daily transactions due to their high volatility, it makes perfect sense to use Tether.

For these reasons and more, it is still worthwhile to consider investing in Tether. While Tether is not necessarily a long-term investment that will grow your money by itself because it stays pegged to the U.S. dollar, there are lending platforms, exchanges and wallets that will pay you high interest rates to store USDT on their platform.

The Future Of Stablecoins 

Regulation will likely be a big theme for stablecoins in 2022, experts say. Like other cryptocurrencies, stablecoins operate outside the U.S. monetary system,  and officials have repeatedly highlighted concerns that they’re slipping through the regulatory cracks. 

Federal authorities such as Securities and Exchange Commission (SEC) Chairman Gary Gensler, Federal Reserve Chairman Jerome Powell, and Treasury Secretary Janet Yellen, among others, are mostly concerned about stablecoins because these types of crypto hold the most potential for future use by everyday consumers to buy things. Because of that, expect continued conversations about stablecoin regulation this year, and possibly even legislation, experts say. 

“I think 2022 will be a bigger year of regulation than any other year before,” says Boneparth. “The more mainstream crypto becomes, the more regulators and policymakers are going to pay attention to it.” 

Stablecoins have been “scrutinized” in particular because regulators don’t know what to make of them and are rushing to figure out how to establish laws and guidelines on how to treat stablecoins, Boneparth says. It’s unclear whether U.S. regulators will choose to treat them as securities, banks, or something else entirely. The White House is planning to release an initial government-wide strategy for crypto and other digital assets, and will ask federal agencies to assess their risks and opportunities, according to a Bloomberg report.

This debate is also intertwined with another hot button topic: whether the Federal Reserve will offer its own central bank digital currency (CBDC). The Fed released a long-awaited report in January exploring the pros and cons of a CBDC, but deferred a final decision on whether to move forward. Instead, the Fed is giving the public and other stakeholders until May 20 to share their input before taking further action. The Fed acknowledged in the report that the move “would represent a highly significant innovation in American money.”

Whatever move the Fed makes next could “fortify cryptocurrencies or detract from their value,” according to Grant Maddox, a certified financial planner and founder of Hampton Park Financial Planning based in South Carolina. “It depends on the direction our government chooses to take,” he recently told NextAdvisor.

Additionally, some experts are saying expected interest rate increases by the Fed this year could stimulate demand for the U.S. dollar, and therefore draw Americans’ attention to stablecoins that are backed by cash. Because the Fed will likely raise interest rates multiple times this year, it “should essentially provide tailwinds for the dollar” and that “stablecoins which are tied to the dollar can also capture this upside,” according to Scott Bauer, a former Goldman Sachs trader who’s now CEO of Prosper Trading Academy, and as reported by Coindesk.

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