Is Tether (USDT) a safe option in the volatile world of cryptocurrencies? How does this digital currency linked to the dollar work? In this article, we clear your doubts clearly and we will give you all the necessary information about this cryptocurrency.
What is Tether (USDT) coin?
Tether (USDT) is one of the many cryptocurrencies available on the market today. But unlike most other cryptocurrencies, Tether has a special feature: is anchored, or "tied," to the value of the US dollar. This means that the value of one Tether should always be equal to one US dollar.
Tether is what is known as a “stablecoin“, which is a kind of cryptocurrency designed to keep its value stable. In the case of Tether, it is backed by US dollars that the company that issues Tether, Tether Limited, claims to have in reserve. The idea is that For every Tether that is purchased, there is one dollar in the reserve of Tether Limited.
How It Works
First of all, Tether is a cryptocurrency, which means that it is a form of digital money that uses cryptography to ensure secure transactions. But unlike other cryptocurrencies like Bitcoin or Ethereum, Tether is a stablecoin, which means that it is tied to a stable asset, in this case, the US dollar.
In simple terms, every time you buy Tether, the equivalent amount of dollars must be deposited into the reserves of Tether Limited. This means that if you buy 100 USDT (the symbol for Tether), you should be putting $100 into the company's reserves. Therefore, Tether can keep its value constant and equivalent to the dollar, because for every Tether coin in circulation, there is a dollar backing it.
To use Tether, you will need a cryptocurrency wallet that supports this cryptocurrency. Once you have the wallet, you can buy it on any cryptocurrency exchange that offers it. Once you have Tether, you can use it to transact, just like any other cryptocurrency. This includes sending money to other people, paying for goods and services, or simply keeping it as an investment.
However, while Tether intends to keep its value constant, there have been some controversies. Some people question whether Tether Limited really has as many dollars in reserve as it claims. Therefore, while Tether can provide some stability in the volatile world of cryptocurrencies, it is also essential that you do your own research and understand the risks before investing.
Where can you buy USDT?
Traders interested in acquiring Tether, also known as USDT, can do so through renowned cryptocurrency exchange platforms worldwide. Binance, crypto.com and Cointree are examples of some of the most popular exchanges where USDT is available to buy and trade.
These platforms offer a secure environment to carry out transactions and have a large number of users, which guarantees the liquidity needed to buy and sell Tether cwith ease. Additionally, these exchanges allow USDT to be traded with a variety of other cryptocurrencies.
It is important to note that, before making any transaction, it is essential verify the security and credibility of the exchange platform. Also, as with any investment, it is crucial to understand the associated risks and carefully consider your financial decisions before investing in cryptocurrency.
What is Tether used for and its importance?
As Tether is a stablecoin-type cryptocurrency, it becomes a valuable resource for investors looking to hedge against the volatility of the cryptocurrency market. Its peg to a real currency, such as the US dollar, It gives it a stability and value that differentiate it from other cryptocurrencies.
Cryptocurrencies like Bitcoin, Ethereum or ADA Cardano are not tied to any tangible real world currency. For this reason, a significant number of cryptocurrency operators see Tether as a safe haven for protect your investment in case of a possible fall in the cryptocurrency market. In addition, Tether has earned the trust of many futures traders on exchange platforms such as Binance or Phemex, making it a very popular option.
In addition to stability, Tether is attractive to many users because allows you to send USDT anywhere in the world, convert it to US dollars or euros and withdraw it easily. This level of versatility facilitates international transactions and can open doors to new opportunities for investors and traders.
What is the advantage of using Tether (USDT) compared to other cryptocurrencies?
One of the main benefits of using Tether (USDT) lies in its comparative stability compared to other cryptocurrencies that present greater volatility. Being asset-based, its value typically remains close to that of the US dollar, which is attractive to individuals who want to maintain consistency in their cryptocurrency wallets and trades.
However, it is important to remember that investing in crypto assets is not regulated. It may not be the most suitable option for small investors and the entire amount invested could be lost.
- Despite USDT being promoted as an asset-backed stablecoin, the danger remains that the issuing organization will not fully honor its collateral commitments. This could raise concerns about the actual strength of your fiat currency reserve.
- The absence of precise regulations and the lack of transparency in the disclosure of financial data by the USDT issuing entity have previously caused controversy. This could raise questions about the true stability and security of the cryptocurrency..
- Unlike decentralized cryptocurrencies, such as Bitcoin, USDT is guaranteed by a centralized entity. This can raise control and trust concerns, as users must trust the issuing entity to sustain the value of the coin.
Why is this crypto stable causing so much controversy?
Tether's main concern lies not with its association with the US dollar, but with the strong claim it makes to have a 1:1 relationship with it.
Tether was the pioneer among stablecoins to appear on the scene. Following its launch, the exchange and acquisition of this cryptocurrency increased rapidly, giving rise to skeptics who questioned the legitimacy of this stablecoin. The concern that arises most often is: Does Tether really have enough US dollars in its reserve to equal the amount of its coins that are in circulation?
Tether's administrative structure has gradually become the subject of close scrutiny. In November 2017, the Paradise Papers were leaked, a 13.4 million page set that shook the world. These revealed that various senior figures at Tether Operations Limited also play key roles at Bitfinex. Both companies share the same CEO, CFO and Director of Strategy: Jan Ludovicus van der Velde. This has fed the conjectures that Tether is nothing more than a cryptocurrency used to manipulate and sustain the value of Bitcoin.
In June 2018, two academics specializing in cryptocurrency from the University of Texas, John M. Griffin and Amin Shams, published a relevant study that practically corroborated the aforementioned suspicions. In their research, titled “Is Bitcoin Really Unpegged From Tether?”, they argue that Tether “concentrates below rounded prices, induces asymmetric correlations in Bitcoin, and suggests Tether reserve insufficiency as the end of the month approaches.”
Negative opinions and problems with US banks and financial regulators
- Faced with the growing wave of criticism that Tether was facing, in March 2017, Wells Fargo, its affiliate bank, decided to cease its services to Bitfinex and Tether.
- In November of the same year, Tether stated that they had stolen from its coffers the amount of $30,95 million in cryptocurrency. To prevent the spending of these stolen tokens, Tether Operations Limited activated a hard fork, a blockchain technology that alters network protocol, making transactions invalid.
- In December 2017, the United States Commodity Futures Trading Commission (CFTC) issued subpoenas to Tether and Bitfinex, under suspicion that they were issuing USDT without the required documentation to show that Tether had sufficient funds to support its circulation.
- In January 2018, Tether officially ended its relationship with its auditor, Friedman LLP, before completing the company's audit process, sparking even more controversy.
- In scandal after scandal, the value of Bitcoin suffered a drastic drop at the end of 2018: On October 14, the value of USDT fell as much as 86 cents on the Kraken exchange, well below its supposed 1:1 ratio to the dollar.
- In April 2019, New York Attorney General Letitia James accused Bitfinex of engaging in a "cover-up to hide the apparent loss of $850 million of joint client and company funds." Bitfinex was alleged to have siphoned off at least $700 million of Tether funds. A month later, a Tether lawyer admitted in a court filing that Tether is only 74% backed by real fiat assets.
- In April 2021, Bitfinex and Tether settled the case with the New York Attorney General. Both companies agreed to pay $18,5 million in fines and commit to deliver, over the next two years, quarterly reports that will reflect Tether's US dollar reserves.
- Since May 2021, the Tether composition report has shown how USDT is not only backed by the dollar and "cash equivalents", but also by "secured loans", "corporate bonds, funds and precious metals" and "other investments".
In the last two years, Tether's image has been severely hit. Despite this, this stablecoin is still on the market and, although its price fluctuates away from the value of the dollar from time to time, these changes are brief and small in magnitude. Tether continues to hold its own as a stablecoin, at least for now.
Currently, there are about 50.000 billion Tether tokens in circulation on the market. The possibility that there is actually $50.000 billion stashed away somewhere to back it up seems extremely doubtful.
USDT Collateral Report
Shortly after the news about the US Department of Justice's inquiry into USDT for alleged deception, Tether Limited disclosed an assurance report audited by Moore Cayman, an overseer of digital assets and investment funds, on Aug. 9 of 2021. This report presents an analysis of the firm's resources and reserves, which, according to Moore Cayman, reached approximately 62.700 billion dollars until June 30.
Tether's chief technology officer, Paolo Ardoino, shared via Twitter on August 9, 2021 that the company had released the "final attestation" and a "detailed analysis of the reserves." «What do you think? Tether is fully supported »Ardoino stated. “The evaluation of commercial papers is provided by S&P. I am sure many already miss our celebrated pie chart," he added.
The aforementioned warranty report covers an analysis of the goods, their quality and expiration/duration measures. It details that, from the “perspective of the company, the CRR prepared by the management of the Tether Holdings Limited group until June 30, 2021 at 11:59 PM UTC, is represented in accordance with the criteria established therein and, in all relevant respects, it is presented fairly.”