Tether: A safe haven for Cryptocurrency volatility?

Tether: USDT

Price: $1,0006

Market Capitalization: $62,281,865,489.03

Supply: 64,476,291,004

Hong Kong-based Tether is a dominant cryptocurrency in the crypto market. Launched by Reeve Collins, Brock Pierce, and Craig Sellars in 2014, it first started out as Realcoin. Tether issues stablecoins which they peg against the U.S. Dollar. The tokens mirror the price of the U.S. Dollar by being pegged against the U.S. Dollar. Therefore by buying a token, in fiat currency, a new Tether is minted for every U.S. dollar that is deposited. The U.S. dollars are then stored in cash and cash equivalents, thereby maintaining their value.

The advantage of the Tether cryptocurrency is that investors and crypto exchanges can effectively park their money in the stablecoin without having to liquidate it to an actual fiat currency. This method is used to store value. It also protects investors from fluctuations in other cryptocurrencies which can be highly volatile.

Market Capitalization

At the time of publication, the market capitalization of USDT stood at $62,281,865,489.03 with close to $57 Billion in trading volume of the last 24 hours. This mainly due to the high demand for Crypto exchanges. The significance of this is that it has almost doubled over the course of three months. There is an increasing demand for the use of USDT as a medium of exchange combined with its ease of use over a diversity of blockchains.

tether market capitalization

Source: CoinMarketCap

Price movement

tether price

Source: CoinMarketCap

The price for one USDT is trading over just $1 at $1.0006. The last 7 days show a low of $0.9998 and a high on price of $0.0015 and recovering to more stable levels at the time of publication. Some real criticism has developed over the last few months around the ability of Tether Inc to be able to back their claims of a 1:1 like for like value exchange. What has emerged recently is that it is claimed that the value of 1 USDT has only been secured by a 74% cash reserve. This was revealed after the state of New York banned Tether from trading in the State. If anything this has not deterred the exchanges and crypto-investors from using USDT.

Future outlook

There has been a lot of criticism around the claims made by Tether that they are able to provide a like for like U.S. Dollar exchange for every token that is minted. Their exclusion from New York also creates more negativity for the Hong Kong Incorporated entity. They have however largely stayed away from the U.S. market and focused predominantly on Asia and Europe which turned out so far to be successful for them. They also include Euro and Yen in their portfolio. Investor sentiment is largely neutral around the coin and the recent increases in trading volume do not show the impact of its sentiment tilting towards a bearish view.

The dominance of the stablecoin is also evident with the closest rival being USD Coin with a market capitalization of $23 Billion. The dust, for now, has settled around their transparency issues and avoiding being audited by auditors.

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