Cryptocurrency market volatility is nothing new, but it has skyrocketed recently. Stablecoins, which aim to maintain their value regardless of market volatility, have received a lot of publicity and attention due to such market downturns.
Stablecoins are used by those who want to own an asset-backed digital currency with stable value.
One of the most popular stablecoins over the years has been tether (USDT), the third largest cryptocurrency by market capitalization and the largest stablecoin.
Despite being widely used, it is a controversial stablecoin. This article explains everything you need to know about USDT.
What is a tether?
Introduced in 2014 by Tether Limited, Tether (USDT) is an ERC-20 token based on blockchain technology and a US dollar-linked stablecoin.
Stablecoins typically have a 1:1 relationship with the US dollar and are less volatile than cryptocurrencies such as Bitcoin (BTC) and Ether (ETH).
As the first exchange to offer the coin, Tether was rumored to be partnering with the Bitfinex cryptocurrency exchange shortly after its introduction. rice field. Tether Limited is owned by Hong Kong-based company iFinex, which also controls cryptocurrency exchange Bitfinex.
What are Tethercoins used for? One of the most important advantages of Tether cryptocurrency is that it allows traders to transfer cash between cryptocurrency exchanges without having to withdraw fiat currency and deposit it on another exchange. This is a time consuming process.
A Tether Treasury wallet was hacked in November 2017, resulting in the loss of $31 million in USDT. A hard fork of Tether followed to ban certain addresses and freeze their funds.
The fact that addresses and assets within the Tether network can be easily manipulated and controlled by a small group of hackers poses a significant vulnerability to Tether as a blockchain network and calls into question its future sustainability. I threw it.
As of today (November 255), USDT coin is one of the most prominent cryptocurrencies, with daily trading volumes totaling billions of dollars.According to statistics from coin market capitalizationUSDT often ranks first in terms of daily trading volume.
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How does Tether work?
The purpose of Tether is to allow 1 USDT to be exchanged for 1 dollar. When a user converts Tether into fiat currency, the coin is destroyed and removed from circulation.
Tether Limited must have a substantial reserve to issue USDT and guarantees that it can be refunded if the customer so desires. That’s what the tether does in principle, but the reality is a little more complicated. There were concerns about the credibility of Tether Limited’s reserves.
Initially, the company said each USDT was backed 1:1 at $1. It turned out to be wrong. A lawyer for Tether Limited said in 2019 that 74% of USDT tokens are backed by cash or cash equivalents.
Furthermore, when Tether disclosed its reserves in 2021, only 2.9% of USDT tokens were cash-backed. The remaining reserves consist of secured loans, bonds and commercial paper.
Since February 2021, Tether has disclosed an independent accountant’s report that provides a detailed breakdown of the reserves backing every token.
USDT coin price history
according to coin market capitalizationAs of Nov. 25, the Tether cryptocurrency was trading at $0.9994, largely maintaining its peg to the US dollar.
There have been de-pegging incidents over the years. USDT fell to an all-time low of $0.5683 on March 2, 2015 in the first few years after its launch. However, it quickly rebounded and by March 15th held par with the USD.
In May 2022, Tether briefly broke out of the US dollar amid the crash of algorithmic stablecoin Terra UST, reaching $0.9485 on May 12. However, he quickly rallied again and on the same day he closed his trade at $0.9976.
Controversy over USDT and Tether Limited
hide the loss
In 2019, New York Attorney General Letitia James accused Tether’s parent company of using Tether’s currency reserves to hide an $850 million loss.
Tether agreed to settle with James in 2021, paying $18.5 million and ending business with The New Yorker. Despite this, Tether denied any wrongdoing and said he simply wanted to move on.
antitrust complaint
A class action lawsuit filed in June 2020 accused Tether of manipulating the market by issuing USDT without dollar backing and then selling the USDT to Bitfinex.
In October 2021, the Commodity Futures Trading Commission (CFTC) filed orders to simultaneously settle claims against Tether Holdings Limited, Tether Limited, Tether Operations Limited, and Tether International Limited.
The ruling required Tether to pay $41 million in civil penalties and prevent further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The decision also forced Bitfinex to pay a civil penalty of $1.5 million. In addition, we ask Bitfinex to prevent us from committing further violations of the CEA and to create and maintain other measures designed to avoid illegal retail merchandise transactions, as Bitfinex is alleged to have committed. I forced it.
Tether News and Price Drivers
Tether has undergone several important milestones that could affect the token’s performance in the future, stirring up or discouraging investor sentiment.
Clarifications regarding FTX and Alameda exposure
On November 17, 2022, Tether announced that Alameda Research, the sister company of defunct crypto exchange FTX, is one of the largest issuers of USDT, but the collapse of both companies is not a danger to Tether. made it clear.
Tether stressed that it is intended to withstand the extreme volatility of the cryptocurrency market. FTX’s scenario was exceptional in many ways, but it doesn’t pose a danger to Tether or his USDT.
USDT will soon be available at ATMs in Brazil
Tether announced in October that USDT coins will be available at 24,000 ATMs across Brazil starting in November.
Our collaboration with Brazilian crypto service provider SmartPay has made the integration feasible, allowing the conversion of USDT to Brazilian Real. SmartPay is connected with TecBan, which operates 24,000 ATMs.
At launch, users will only be able to deposit USDT and withdraw Reals. However, starting in February, he will be able to deposit Reals at ATMs and receive USDT.
“Difficulties and restrictions imposed by inflation and an inclusive financial system are preventing many Brazilians from participating in the country’s growing economy,” said Paolo Ardoino, chief technology officer at Tether. he added:
“The addition of Tether tokens to ATMs across Brazil gives us the opportunity to bring more people into the financial system. I guess.”
USDT Advantages and Disadvantages
Like all other cryptocurrency assets, USDT has strengths and weaknesses. Let’s explore some pros and cons.
Strong Points
liked and trusted: USDT is the most popular stablecoin. It usually maintains a peg to the US dollar.
high liquidity: USDT often has the highest trading volume on any given day, making it a highly liquid asset compared to other less liquid assets.
low volatility: USDT is less volatile than Bitcoin (BTC) and Altcoins as its value often hover around $1.
easy to access: USDT is available on almost all exchanges and all major blockchain networks.
Cons
lack of transparency: Tether continues to be closely monitored. We have not yet implemented a transparent business strategy. Moreover, whether to keep the US currency reserves equal to the available supply is yet to be decided.
accusation and litigation: Tether has been the subject of controversies and lawsuits that may have damaged its reputation.
Conclusion
Since its inception, the price of Tether (USDT) has been fairly stable, fluctuating around $1. Nevertheless, external circumstances caused USDT to lose its peg, albeit temporarily.
USDT recovered every time the peg was lost and also recovered when the peg crossed $1. USDT has been the most popular stablecoin on the market for quite some time.
The question remains whether USDT will continue to be the most popular stablecoin, or whether USDT’s powerful nemesis, USD Coin (USDC), will take over.
Knowing key metrics about Tether is important to access the health of your project, but it should not take the place of your own research. , you should always conduct your own due diligence before trading, considering the opinions of a wide range of analysts while examining fundamental analysis.
Please note that past performance is no guarantee of future returns. And don’t trade or invest money you can’t afford to lose.
FAQ
How many USDT coins are there?
according to coin market capitalizationas of November 25, USDT has 65.36 billion tokens in circulation.
Who owns Tether?
Hong Kong-based iFinex, which also operates the cryptocurrency exchange BitFinex, is the owner of Tether.
What makes Tether unique?
Tether is unique because it is backed by the company’s reserve assets to ensure that USDT maintains a 1:1 exchange rate with the US dollar.
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