What Is Tether? How Does USDT Work?

Image of a red background. On it is shown the bottom part of a smart phone and a golden coin with the Tether crypto logo

Among all the existing cryptocurrencies – there are now almost 20,000 – there is one that stands out for its performance. If all major digital currencies continue to be characterized by very high volatility, Tether stands out for its almost marble stability with a trend that looks like an almost completely flat encephalitic: in the last twelve months it has had an isolated low of $0.94 and a peak of $1.03, remaining almost firmly anchored around the one dollar threshold.

What is Tether though? Unlike bitcoin and other currencies, Tether stands out as a “stablecoin”, an asset specifically designed not to fluctuate in value, linked to the one-to-one parity with the dollar. But under this stability a dark reality could be hidden that makes even Bitcoin itself tremble, whose prices would have been supported in part by purchases financed by Tether.

In this article we’ll be discussing what is Tether to help you learn more about the most famous stablecoin on the market today.

What Is Tether?

Tether (USDT) is a cryptocurrency that is issued only if every single unit is covered by a dollar in the reserves of Tether Limited, a company of the British Virgin Islands, according to what has been reconstructed by the New York Times. And the project is precisely that the stability guaranteed by the dollar can be combined with the operational potential of cryptocurrencies. If you’re unfamiliar with cryptocurrencies we can explain what is Tether in this way – it’s like Bitcoin, except it’s stable. The stability, however, means two things – you will be more confident your investment in crypto won’t go away in a second, but you also aren’t likely to receive big returns for it in long term investing.

Tether first emerged in 2014 under the name of Realcoin but soon changed it to its current name. The currency today has a circulation of over 72 billion units with a capitalization of 72.3 billion dollars. In fact, just in order not to be contradicted, the price is currently fixed at $0.99.

Screenshot of the website of Tether crypto

Who Uses Tether (USDT)?

Knowing what is Tether, the biggest and most popular stablecoin today, you may be wondering who uses it. Because of its stability, Tether is widely used both by users and exchange platforms as a stability asset to navigate the roller coaster of cryptocurrencies. Many most experienced investors and traders use it to switch from one cryptocurrency to another in moments of high tension, without having to convert into fiat currencies. They also use Tether to freeze profits in times of high volatility or to transfer funds from one platform to another, which often do not trade the same cryptocurrencies.

But even the platforms themselves use it as stability anchors. Some use it instead of the dollar for customer accounts, but also to trade cryptocurrencies with other platforms without having to hold dollar accounts. A “pass-through currency” could be explained to what is Tether, a coin that has established itself as a payment in many crypto services.

What Is the Issue With Tether?

The question about what is Tether’s issue started appearing a few years back, when people raised concerns that the organization behind the USDT coin is not guaranteed by corresponding dollar reserves. The cryptocurrency community has begun to fear that Tether Limited has started minting money without adequate hedging and that today it does not have the adequate reserves to convert the currencies in circulation. This has made people wonder what is Tether’s real stability and is it a risk to the cryptocurrency ecosystem. People fear the real use of the stablecoin is the keep the price of Bitcoin high and if it drops some day, so will the price of the king crypto.

The company behind Tether has been investigated by the New York attorney general for the concerns about its pegging to the dollar. The stablecoin was connected with Bitfinex exchange for financial mismanagement. As part of the settlement, Tether is now prohibited to do business in the New York state.
The concerns about what is Tether’s real stability and is it actually pegged to the US dollar, have reflected to other stablecoins as well.

It remains to be seen what is Tether’s future and is it really in the state crypto skeptics fear it to be.

What Is Tether Going to Be Used for in the Future?

Tether (USDT) is the first and so far most popular stablecoin. The price of it is pegged to the US dollar, meaning you can’t mine or stake it, instead every new coin is backed by a US dollar. However, the organization’s financial management has raised concerns about what is Tether’s stability and is it really a better alternative for people who want to use crypto but don’t want the volatility. What is Tether’s real situation remains to be seen, for now it is in the top five big cryptocurrencies by market capitalization, as people seem to still trust it very highly. If it remains pegged to the dollar, it may grow in adoption. If it doesn’t, the whole crypto market may be influenced. Tether is definitely a cryptocurrency that should be followed in the future.

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