According to CoinGecko, the market capitalization of this stablecoin exceeds $65 billion. In terms of volume, it ranks third among the largest cryptocurrencies, second only to Bitcoin and Ethereum. However, the trading volume of USDT on exchanges exceeds the combined volume of the first two cryptocurrencies.
Let's understand what stablecoins are - the name comes from the word "stable." What exactly makes the currency stable?
Let's explain: despite the advantages of cryptocurrencies, they are always criticized for their high volatility.
For example, Bitcoin was worth over $67,000 at the end of last year, after which a prolonged correction began, reducing its value by more than 70%. With frequent fluctuations in the exchange rate, it can be quite problematic to make plans and pay for goods and services.
Stablecoins were created to address this issue: their exchange rate is much more stable because they are always pegged to the dollar.
How is it tied to fiat currency?
The main support for Tether (USDT) is the backing of fiat currencies. However, besides fiat currencies, it can also be backed by other assets such as oil, diamonds, cryptocurrencies, precious metals, etc.
- First, a reserve is created where the actual dollars are held.
- Then digital coins are minted in an amount equal to the number of those dollars.
For example, to buy 100 USDT, you would need to pay $100. If you want to convert back to fiat, the stablecoins are redeemed, and the money is returned at a 1:1 ratio.
By the way, in the past, dollars were also pegged to gold, meaning they were backed by something other than faith in the U.S. economy.
Where can USDT be used?
You can use USDT to pay for goods and services.
It can be used for crypto lending. Some platforms offer cryptocurrency loans with more favorable interest rates than banks.
It can be used for trading on cryptocurrency exchanges, for example, if you need to wait out a period of high volatility in other cryptocurrencies.
Where is the best place to buy and store USDT?
The specifics of storing and using tokens depend on the blockchain they are implemented on. In most cases, the tools used for the underlying currency of the chosen blockchain are sufficient.
Tether USDT tokens on the Ethereum blockchain can be stored in community-approved wallets such as:
- multi-currency wallets: Exodus, Trust Wallet, Jaxx, and Atomic Wallet;
- hardware wallets: TREZOR, Ledger;
- browser plugin: MetaMask.
If you have chosen a token implemented on the TRON blockchain, any wallet from the list posted on the official website of that blockchain will be suitable. You can easily store USDT on the Binance Chain and Binance Smart Chain, or simply keep it on the exchange account.
We recommend carefully studying this information. We are confident that you will make the right choice.
Why do some doubt the reliability of USDT?
There are several questions regarding the Tether company. For example, in 2018, they sent $625 million to the Bitfinex exchange, which needed liquidity. It turned out that these funds were from the "reserve fund." But what if Tether suddenly has to fulfill other obligations of affiliated companies tomorrow? This is a rhetorical question.
In May of this year, the USDTcapitalization dropped from $83 billion to $71 billion and continues to decline. Investors became worried that a collapse could occur, similar to what happened with Terra, and started transferring funds to other stablecoins like USDC and BUSD. The capitalization of these tokens has increased amid these developments.
Recently, there have been rumors that Tether is preparing for an "infernal audit" to remove all accusations and suspicions. If they successfully pass this test, there is a great chance to regain full trust and increase their capitalization.
In June of this year, the company burned 6.6 billion USDT on the Tron blockchain and 4.5 billion USDT on the Ethereum network. Token burning is the intentional destruction of a certain amount of coins to reduce their supply.
Tether announced the burning of their own tokens worth $11.1 billion. The CEO of the USDT stablecoin issuer, Paolo Ardoino, stated that the withdrawal of the altcoin from circulation is the result of recent redemptions.
What are the prospects for Tether?
Despite some drawbacks, many optimistic experts are confident that Tether has a bright future ahead. Some also believe that they can become a convenient tool for real estate or securities transactions.
Others predict that stablecoins will play a role as digital embodiments of various traditional assets, including fiat money. However, this requires close interaction between traditional and cryptocurrency trading platforms.
In early April, the UK government's press service announced its intention to recognize stablecoins as a means of payment. The Bank of England then announced a set of measures to maintain stability in the financial sector and protect investors who have invested their capital in digital assets. Therefore, a bill on stablecoins may be passed this August.
The prospects for the development of USDT are quite interesting, and the whole world will be watching them. We recommend that you familiarize yourself with advantageous exchange rates for Tether (USDT) currencies.