What Is Tether (USDT)?
Tether (USDT) is a blockchain-based cryptocurrency whose tokens in circulation are backed by an equivalent amount of U.S. dollars, making it a stablecoin with a price pegged to USD 1.00. Stablecoins track traditional fiat currencies, like the dollar, the euro, or the Japanese yen, held in a designated bank account.
Tether tokens, which were developed by the crypto exchange BitFinex, are the native tokens of the USDT network and trade under the USDT symbol. As of October 2021, USDT is the fifth-largest cryptocurrency by market capitalization, worth more than $68 billion.
USDT belongs to a breed of cryptocurrencies called stablecoins which aim to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum. That would allow it to be used as a medium of exchange and a mode of value storage instead of being used as a medium of speculative investments.
Tether specifically belongs to the category of fiat-collateralized stablecoins. This means that a fiat currency like the U.S. dollar, the euro, or the yen, backs each cryptocoin in circulation. Other stablecoin categories include crypto-collateralized stablecoins, which use cryptocurrency reserves as collateral, or non-collateralized stablecoins. non-collateralized stablecoins don’t have any collateral but operate similarly to a reserve bank to maintain the necessary supply of tokens, depending on the economic situation.
What Is Tether Used for?
Tether is helpful for crypto investors because it offers a way to avoid the extreme volatility of other cryptocurrencies. Furthermore, having USDT (as opposed to the U.S. dollar) removes transaction costs and delays that impair trade execution within the crypto market.
How Do I Buy USDT?
USDT tokens can be transacted on popular cryptocurrency exchanges, including Binance, CoinSpot, BitFinex, and Kraken.
What Is the Point of the Tether Token?
(USDT) offers a way for investors to avoid the extreme volatility of other cryptocurrencies. By moving value to USDT, a trader might reduce their risk of exposure to a sudden drop in the price of cryptocurrencies. It is also much quicker and cheaper to transfer BTC into USDT than the U.S. dollar.
Is Tether a Stablecoin?
Yes, Tether is the first and most well-known stablecoin in the crypto world. Other stablecoins include True USD (TUSD), Pazos Standard (PAX), and USD Coin (USD).
How Does Tether Stay at $1?
While USDT has dropped below $1 before (and risen above $1), the stablecoin can retain its value because it is pegged to a matching fiat currency fund and 100% backed by Tether’s reserves.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties regarding the accuracy or timeliness of the information contained herein. As of the date, this article was written, the author does not own cryptocurrency.
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