Brief content

Tether (USDT) is one of the most popular stablecoins. It was designed to maintain a one-to-one relationship with the USD. The coin exists on many different blockchains and has seen increased trading volumes and improved liquidity over the past few years.

Like other stablecoins, USDT is useful for cryptocurrency trading because it allows traders to avoid the market volatility that is typical of BTC and other crypto-assets. Using stablecoins also eliminates additional costs and delays when converting between cryptocurrencies and fiat currency.


Introduction

Tether is a key part of the cryptocurrency ecosystem. As of December 2020, Tether ranks fourth in the world by market capitalization (almost $20 billion) among cryptocurrencies, trailing only Bitcoin, Ethereum, and XRP. In addition, it is often considered the coin with the highest daily trading volume, even surpassing Bitcoin.

But what is Tether and how can it be useful for you?


What is Tether (USDT)?

Tether (USDT) is the world's first stablecoin (a cryptocurrency that mimics the value of fiat currency). It was originally launched in 2014 under the name Realcoin by Bitcoin investor Brock Pierce, entrepreneur Reeve Collins and software developer Craig Sellers.

USDT was originally released on the Bitcoin protocol via the Omni Layer, but has since migrated to other blockchains as well. In fact, as you can see in the chart below, much of its supply exists on Ethereum as an ERC-20 token. It is also released on several other blockchains, including TRON, EOS, Algorand, Solana, and the OMG network.



Tether has experienced both successes and controversies, like many of the world's leading cryptocurrencies.

The price of USDT was quite volatile, especially in the early days, and at one point even reached $1.2. However, since the beginning of 2019, the coin has experienced much less volatility. This is probably due to the steady growth of the trading volume and the general development of the cryptocurrency market.


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How does Tether (USDT) work?

The benefit of stablecoins lies in their relative stability, unlike more traditional crypto-assets. The attractiveness of Tether stablecoin lies in its peg to fiat currency. It is claimed that initially USDT was pegged specifically to USD, and for every 1 USDT there was 1 USD in the supply.

According to the original Tether whitepaper:

Each unit of Tether issued is backed one-to-one (ie one Tether USDT equals one USD) by a corresponding unit of fiat currency held in escrow by Hong Kong-based Tether Limited.

While the original individual asset for Tether was USD, it now includes collateral for other real-world equivalents of cash, assets, and loan receivables.

As you can see on the USDT/USD chart below, the coin is (generally) trading at a stable rate against the USD. However, significant market events can affect its price.

usdt usd графік


Why Tether (USDT) is important

Tether bridges the gap between cryptocurrency and fiat currencies. It's an easy way for investors to get a custom USD deal, without the inherent volatility of other cryptocurrencies.

By providing this stability, investors can own a digital asset similar to fiat currency, but easily trade other coins in cryptocurrency markets. Tether's key features make it a popular coin, although it is not immune to risk either.

Basic capabilities

  • 1:1 ratio (USD to USDT)

  • Stability (how stable USD can be considered)

  • Availability on different blockchains

  • Different use cases compared to traditional cryptocurrencies


Options for using Tether (USDT)

Quick access to market stability

If the price of Bitcoin or other crypto-assets drops quickly, you can quickly trade USDT instead of trying to cash out.


Easy money transfer between exchanges

With Tether, you can move your funds between exchanges very quickly. It can also be useful for arbitrage trading with other coins.


Trading on cryptocurrency exchanges

Some exchanges do not allow deposit and withdrawal of fiat money, but USDT trading is allowed. By getting Tether first, you can trade on these exchanges without worrying about market volatility like holding your main trading funds in BTC (or other cryptocurrencies).


Forex style trading

Since USDT is pegged to the USD, you can trade Forex-style by exchanging local (non-US) currencies for USDT when their value is high against the USD. You can then cash out in the local currency when the local currency falls or exchange for other assets.


How to store Tether (USDT)

In addition to Binance and other cryptocurrency exchanges, you can store your USDT in various cryptocurrency wallets. These include web wallets and mobile wallets (such as Trust Wallet) or cold hardware wallets (such as Ledger) through third-party software wallets.

Since USDT is issued on different blockchains, you need to make sure that you are transferring them from the same network to the same network.

For example, if you go to the USDT withdrawal page on Binance, you will find five different network options to transfer: Binance Chain (BEP2), Binance Smart Chain (BEP20), Ethereum (ERC20), Tether (OMNI) and Tron (TRC20) .

USDT to Binance network transfer options.


So be careful. If you use the wrong network, you can lose your funds. For example, if you try to send Omni USDT to an ERC-20 USDT address, your transfer will most likely be lost.

Please note that as of December 2020, ERC-20 USDT is the only type supported by Ledger. This means that USDT running on the Bitcoin (Omni Layer) blockchain is not available for transfer to Ledger hardware wallets.


Other Tether cryptocurrencies

Besides USDT, Tether also has other stablecoins:

  • EURT: Tether coin pegged to the Euro

  • CNHT: Tether coin pegged to the Chinese Yuan

  • XAUT: Tether coin tied to physical gold


You can see how much of each coin is circulating on different blockchains on the Tether Transparency page.


Final thoughts

Stablecoins have brought more convenience to the world of cryptocurrencies as they reduce the need for traders to convert multiple times between fiat currencies and cryptocurrencies. Thus, USDT is a handy asset to have on hand for cryptocurrency trading.

Although there have been various questions about the validity of the reserves, the volumes over the past few years indicate the credibility of Tether's value as a stablecoin. Besides USDT, you can also use other stablecoins like BUSD, USDC, TUSD and PAX.