TL:DR
Stablecoins are a way for crypto investors to transfer over their crypto holdings into investments meant to hold a one to one value with a fiat currency. For Tether (USDT) it is designed to hold a one-to-one value with USD. USDT exists and can be traded on multiple blockchains.
Stablecoins are a great way to avoid market volatility especially from newer projects. USDT is a great to invest in crypto projects while avoiding the extra costs and delays that results from converting between crypto and fiat.
Introduction
Tether is the most widely adopted stable coin in the crypto industry. With a market cap of nearly $20 billion, this cryptocurrency is the largest stablecoin. Tether allows users to transact with a currency that does not experience large volatility. This makes it an ideal tool for companies in the crypto space who need to liquidate large amounts of digital assets into cash quickly, or for traders who want to avoid volatility during market downturns.
As of May 10th 2020, Tether is the 3rd largest crypto by market cap, sitting at 83 billion and the largest stablecoin. However, what is this project about? Lets find out.
What Is USDT?
USTether is a stablecoin (are coins that seek to peg their value to some external source) designed to be pegged to the US Dollar. It was originally launched in 2014 as Realcoin, but was later renamed to USTether and then finally to USDT. In addition to being compatible to Bitcoin’s blockchain, USDT has also been compatible with Ethereum, EOS, Tron, Algorand and OMG blockchains.
As of May 2020, a large liquidity of USDT can be found on Tron. Ethereum is the second blockcahin with the highest supply of USDT. It exists as an ERC-20 token, the token standard on the Ethereum blockchain.
USDT has come a long way from it early days. Before the market developed and matured, stablecoins such as USDT were also quite volaties. As the market cap of cryptocurrencies grows, so does the popularity of stablecoins as a way to hedge against inflation. Interested users can lend their stables such as Tether (USDT) and earn yields ranging from 3% to as high as 20%.
Why Is USDT Important?
Tether bridges the gap between traditional finance and the new world of cryptocurrencies. It presents an easy way for investors to obtain a one-to-one trade for the USD, without the innate volatility of other cryptocurrencies.
This added stability that it provides makes a popular option for investors seeking to hedge their money in less volatile assets. Although, just like anything, USDT still has some risks, as mentioned earlier USDT isn't entirely immune from volatile swings.
Further, it makes a popular haven for investors to hold a digital asset similar to fiat currency that can be trade for other coins.
How Does USDT Work?
Tether (USDT) is a stablecoin that seeks to maintain a one-to-one exchange rate with the U.S. dollar. Stablecoins like Tether are useful when you want to trade cryptocurrency without relying on the price volatility of your currency pair.
Tether (USDT) is created to be anchored against the value of USD, according to its developer. Each USDT coin is backed by a real USD on a 1:1 ratio, which makes it ideal for storing or paying with cryptocurrencies without the fear of losing money due to volatility.
Tether was born from the idea of making traditional money transfer mechanisms more efficient in a digital age. Originally, each tether was equal to one unit of the currency held in the reserves. Today, each Tether is backed by and pegged to a combination of real-world assets. For every new USDT coin it mints, the euqivalent amount of USD will be added to its reserves.
Features of USDT
The following are key features of USDT.
1:1 USD Ratio
According to USDT's whitepaper, there will be a 1:1 ratio of USDT to USD. So for every new Tether coin minted an equivalent amount of USD will be available in the reserve.
Stability
The goal for USDT is to provide stability in the crypto. Thus, it seeks to mimic the price of the USD and allow traders to utilize that liquidity in the crypto market.
Availability
Not only could there be more USDT minted, but USDT is available in most major blockchains. Thus, USDT is compatible with blockchains such Ethereum and Binance among others. That means if you are looking for a place to store your portfolio value during volatile times, then USDT will be an option for your selected blockchain.
Use Cases for USDT
Trading on Crypto Only Exchanges
Decentralized Exchanges like Uniswap only allow traders to trade crypto with crypto. That means no fiat currency will be accepted. USDT is a great way for a trader to get into markets such as these.
Safe Haven from Market Volatility
It is true the crypto market is relatively new. As such, it is common to see market volatility. As mentioned earlier, USDT is a popular choice for investors seeking to safekeep their investments from the volatile market.
How To Buy Tether (USDT)?
You can buy USDT on Binance.
Log In/ Create An Account
If you haven’t done so already you can create an account with Biannce. Keep in mind Binance is a KYC platform so you need to provide some form of ID. If you have an account already you can just log in.
Search For USDT
Once logged in click on trade and search for "USDT" in the search box.
Select Amount and Buy
Once you find the token select the amount you want to purchase and select confirm the order.
Final Thoughts
Stablecoins, such as Tether, have been instrumental in reducing the need for traders to convert several times between fiat currencies and cryptocurrencies. The USDT is an asset that provides much-needed stability.
There will always be questions about the validity of a stablecoin, but if you are interested in using one of these coins, USDT is a good option. Apart from USDT, you can also opt to use other stablecoins, such as BUSD, USDC and PAX.
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