If you have been trading cryptocurrency for a while, you probably know that some cryptocurrency exchanges (such as Bitfinex) do not accept US Dollars for you to deposit and buy cryptocurrencies. However, they do offer markets which are seemingly denominated in USD.
On top of this, some exchange including Poloniex and Bittrex offer Bitcoin trading against USDT pairs. The “USDT” prices are usually very close to the worth of one dollar on exchanges that support USD (such as Coinbase and Kraken).
If you are new to all of this, you should know that nothing is accidental with these numbers and values. The answer to the USD and USDT questions that you may have in your head right now is simple – and it is called Tether (USDT).
Tether is a cryptocurrency which acts as a hybrid. Officially, it is designed to be a crypto-fiat “stablecoin” which value is pegged – or rather – tethered – to the value of fiat currencies. In this manner, USDT is a currency that Tether most frequently uses – and one that is equal to the world’s official reserve currency which is the US Dollar.
More specifically, one USDT is intended to remain exactly equal to $1 (without a cent more or less). So, the best way to explain what USDT is – is as a version of the US Dollar in the crypto world. Or better yet, a crypto dollar in terms of its value.
Another currency that Tether uses is the EURT, which just like USDT is to the US Dollar, is a crypto Euro for the Euro cryptocurrency. As Tether recently announced, there will also be a JPYT cryptocurrency coming soon – acting as the cryptocurrency “brother” of the Japanese Yen.
Tether users are protected from the volatility of cryptocurrency. However, they are still exposed to fluctuations in the price of the pegged fiat currency. For example, if the US dollar’s value halves overnight, holding Tether (USDT) would lose an equal amount of value as the USD.
So, if Tether claims that their tokens were worth $1, the statement would be false without a provable basis. Or, if USDT does hold any value – or a steady value – it must be backed by real USD reserves. So, for 1 USDT to be worth $1, it must be redeemable at any time for $1 of the fiat currency. Right now, USDT is only directly convertible to USD through the Kraken exchange.
Kraken’s bank has real USD reserves, which allows it to convert USD to USDT at the rate of 1 USD per 1 USDT. To sum things up, the only reason why 1 USDT equals $1 USD in terms of price is the fact that exchanges keep a reserve of dollars to back every USDT in existence.
Tether is therefore dependent on good financial relationships as well as permission from legal authorities. A riskier model of the cryptocurrency would involve regular cryptocurrencies (which are not linked to fiat). So, Tether requires no permission and cannot be censored – but the users are required to provide customer verification.
The Tether cryptocurrency was designed in order to keep the price fluctuations of cryptocurrencies in place. Moreover, it looks like an odd coin because of its value and peg to the US dollar – which is why it is not considered an investment but is more like a deposit in a (risky) bank accounts which pays 0% interest.
In reality, Tether is riskier than regular cryptocurrencies and offers no gains. The main use for it is as an alternative to fiat – meant for traders and investors. And if you are still asking yourself why this is the reason, let’s list the benefits of Tether:
If Tether sounds like an interesting way for you to buy crypto, you should create a Tether account and get a Tether wallet.
The best way to get a Tether wallet is by registering on the Tether.io website. At some points in history, the website did not allow buying Tether – but you can request notification about registration reopening by sending an email to [email protected].
If you want to buy Tether (USDT), you can do it on different exchanges offering fiat market for USDT. These include Kraken, Bitfinex, Coinut, Exmo and C-CEX where you can buy USDT with US Dollars. On the exchange Exmo, you can buy USDT with Russian rubles, too.
Even though there is an ongoing controversy around Tether and a lot of articles posted by big players which express concerns about Tether, the articles reflect doubts and fears that have been percolating – mainly sourced from “anti-Bitcoiners” with vested interest in the failure of Bitfinex and the Bitcoin ecosystem in large.
So, critics accuse Tether of running fractional reserves (without actual USD backed in banks). However, Tether (USDT) has been going strong over the past few years. And even though it does not guarantee USD convertibility, it has become a popular base currency across a variety of cryptocurrency exchanges.
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