What is Tether (USDT)?
USDT is the symbol of Tether, a cryptocurrency pegged to the US dollar. This means that USDT is a stablecoin that fluctuates in value with the US dollar and is backed by Tether’s dollar reserves. USDT is issued by Tether, a company owned by iFinex, a Hong Kong registered company that also owns cryptocurrency exchange BitFinex.
As of March 2024, USDT is the third largest cryptocurrency after Bitcoin (BTC) and Ethereum (ETH), and the largest stablecoin with a market capitalization of nearly $99 billion. From 2023 to early 2024, Tether’s USDT accounted for most of the trading volume with other cryptocurrencies.
Important points
USDT is a stablecoin, a type of cryptocurrency that is pegged to fiat currency, the US dollar. USDT investors are looking to invest in cryptocurrencies while avoiding the extreme volatility of untethered cryptocurrencies. Tether can be purchased through cryptocurrency exchanges or apps using Kraken and Coinbase, among other cryptocurrency exchanges.
Understanding Tether (USDT)
USDT (Tether) belongs to a rapidly growing class of cryptocurrencies called stablecoins, most commonly used to create untethered currencies by tying their value to the price of a traditional currency such as the US dollar. Avoid the extreme volatility of cryptocurrencies.
Tether was launched as RealCoin in July 2014 and rebranded to Tether (USDT) in November 2014. Originally based on the Bitcoin blockchain, Tether now supports Bitcoin’s Omni and Liquid protocols, as well as Ethereum, Avalanche, Kava, Polka, Tron, and EOS. , Algorand, and Solana blockchains.
Tether also issues tokens pegged to the euro, offshore Chinese yuan, Mexican peso, and gold, all of which represent a small fraction of the market capitalization of the USDT token, which is pegged to the US dollar.
Currency fixing method
Pegged currencies are often backed by reserves consisting entirely or largely of the pegged currency. Many fiat currencies, including those of Panama and Saudi Arabia, are pegged to the US dollar. This protects the currency from extreme value fluctuations, as the trading value of the currency fluctuates with the US dollar.
The same price stability underlies pegged cryptocurrencies.
Tether transparency
Tether updates the breakdown of its reserves daily on its website. As of March 3, 2024, USDT’s assets are reported at $99.45 billion. The company reported holding 84.58% of its reserves in cash, cash equivalents, short-term deposits, and commercial paper. Of this amount, 76.87% were U.S. Treasury bills.
It also held 0.05% of its reserves in corporate bonds, 3.62% in precious metals, 2.91% in Bitcoin, 4.95% in secured loans to unaffiliated entities, and 3.89% in other investments.
Tether advertises that all USDT is backed by the same amount of currency, but as the numbers above show, this is not entirely true. However, we have generally kept our one-on-one commitments.
stable
Stability in value encourages the use of stablecoins as a medium of exchange, similar to traditional money.
As a matter of fact, stablecoins have made it easier to speculate in the cryptocurrency market. Its rapid growth in popularity is also a result of the use of stablecoins as collateral by decentralized finance (deFi) lending and staking protocols.
History of tether
In November 2017, Tether reported the electronic theft of $31 million worth of USDT tokens. The company implemented a hard fork, a security technique that splits the blockchain into two streams.
By that time, the company was already dealing with questions about the adequacy of its reserves and, as subsequent investigations showed, had problems accessing banking services.
2019
In April 2019, New York Attorney General Letitia James obtained a court order restraining Tether and Bitfinex’s parent company, Ifinex, from further violating New York state law. Bitfinex is using Tether to offset Bitfinex corporate and customer funds that were frozen (and ultimately seized) by Panamanian banking partner Crypto Capital Corp. in a money laundering investigation. The company was found to have borrowed at least $700 million from its reserves.
Tether is an accredited member of the Blockchain Alliance, a coalition working to advance the development of blockchain and its legal use.
2021
In February 2021, Tether and Bitfinex paid an $18.5 million fine, ceased doing business with New York State residents or entities, and provided information about their reserves to the New York Attorney General’s Office for the next two years. We agreed and settled the lawsuit.
In October 2021, the U.S. Commodity Futures Trading Commission (CFTC) said Tether had agreed to pay a $41 million fine “for claims that Tether’s stablecoin is fully backed in U.S. dollars.” Announced. In fact, according to the CFTC, “Tether held sufficient fiat reserves in its account to back USDT Tether tokens in circulation during a 26-month sample period from 2016 to 2018.” That was only 27.6% of the day. As part of the settlement, Bitfinex agreed to pay a $1.5 million penalty to resolve separate CFTC claims.
2022
In May 2022, despite not being an issuer affiliated with Tether or Bitfinex, Tether’s price briefly fell to $0.96 following a peg loss on TerraUSD (UST). The price of the Tether token quickly recovered to above $0.99, and Tether said it would continue to honor redemption requests on a 1:1 ratio to the US dollar.
Tether also launched MXNT, a stablecoin backed by the Mexican peso, following previous expansions into Europe (EURT) and China (CNHT).
2023
In 2023, Tether acquired Northern Data Group, expanding into the field of artificial intelligence. The new CEO is Paolo Ardoino, former chief technology officer and passionate advocate of cryptocurrencies and blockchain financial solutions.
In the same year, the long-running lawsuit against Tether and Bitfinex finally came to an end after Judge Laura Swain dismissed the claims in November 2023.
The company also continued to participate in several measures to strengthen the security of cryptocurrencies, educate users and lawmakers, and cooperate with law enforcement agencies.
How is USDT different from other cryptocurrencies?
USDT is a pegged cryptocurrency. This means that its value is as volatile as the US dollar. Other examples include USD Coin (USDC), Binance USD (BUSD), and Dai (DAI).
One of the benefits of tethering is that it allows investors to easily move funds between crypto markets and the traditional financial system. There is no need to wait for a sudden drop in trading value.
How can I buy USDT?
Tether tokens can be bought and sold on cryptocurrency exchanges such as Binance, CoinSpot, Bitfinex, and Kraken. Some online brokerages also offer virtual currencies.
Is Tether the largest stablecoin?
yes. Tether is the first and most well-known stablecoin in the cryptocurrency world. The company’s market capitalization reached nearly $99 billion as of March 2024.
conclusion
Tether is a cryptocurrency that seeks to maintain its value pegged to an underlying currency such as the dollar or euro. This is done by holding enough real currency or equivalent currency in reserve so that the virtual currency holds the same value as fiat currency.
Tether is primarily used to convert cryptocurrencies into fiat to prevent slippage, i.e. a decrease in value between the initiation and execution of a transaction. However, it may not be precisely pegged to the fiat currency it is supposed to be tracking. For example, when the exchange FTX collapsed in November 2022, Tether plummeted to nearly $0.995, but quickly rebounded and at times rose by more than a 1:1 peg.
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