What is Tether?
Tether (USDT) is a cryptocurrency with the value pegged to the US Dollar through a 1:1 reserve ratio. It was launched in 2014 and is issued by the Tether Limited company. USDT is used as a stablecoin to provide traders with a reliable way to hedge against market volatility without cashing out into traditional fiat currencies.
How Does Tether Work?
Tether maintains its peg to the USD by holding reserves in traditional bank accounts and publishing these balances regularly for transparency. The company claims that each USDT in circulation is backed by an equivalent amount of US Dollars in reserve. Users can buy USDT on cryptocurrency exchanges or directly from Tether Limited.
Use Cases of Tether
- Trading: Traders use Tether as a stablecoin to park their funds during market downturns and quickly convert back to cryptocurrencies when needed.
- Remittances: Tether can be used as a low-cost and fast way to send money across borders, especially in regions with limited banking access.
- Investing: Some users use Tether to store value without being subject to the price fluctuations of other cryptocurrencies.
Case Study: Tether and Bitfinex
One of the most controversial aspects of Tether is its relationship with the cryptocurrency exchange Bitfinex. Both companies share common management, and there have been allegations of Tether being used to manipulate the price of Bitcoin on Bitfinex. Despite these controversies, Tether remains one of the most widely used stablecoins in the cryptocurrency market.
Statistics on Tether
As of August 2021, Tether is the third-largest cryptocurrency by market capitalization, with a market value of over $62 billion. It has become a key player in the crypto market, with a daily trading volume surpassing that of Bitcoin.
