Is USDT safe and stable? Why stablecoin concept is confusing

By Bfab | Good vibes | 15 Feb 2022

Most of you have already used USDT for trading or DeFi. You trust it because it contains the acronym USD and because it is called a stablecoin.

Is USDT safe?

Tether (USDT) is the most valuable stablecoin, with a market cap of $78 billion, vs. $52 billion for USD Coin (USDC), the next largest stablecoin. Although Tether claimed it had cash reserves equal in value to the stablecoins it issued, the US government found it was not true at all. During a period from 2016 to 2018, the CFTC found that Tether held only 27.6% of the value of issued stablecoins in fiat currency reserves. Furthermore, the US government said that the company’s reserves depended on “unregulated entities and certain third-parties to hold funds comprising the reserves” and shared reserves with Bitfinex, a cryptocurrency exchange with an undefined relationship to Tether.

It raises at least two issues:

Tether has only around one quarter of the total USDT value in fiat currency reserves.
Tether would confusely be linked to Bitfinex, and everything would be centralized.

Is USDT stable?

As long as everyone trusts USDT, notwithstanding the doubts about their fiat currency reserves, it will remain stable vs. USD. If holders lose their trust in USDT further to rumors and switch to alternative solutions like algorithmic stablecoins or low volatility coins, USDT will then lose its liquidity and value.

In summary, USDT will remain stable vs. USD as long as enough people believe in it, which may not last forever.

Furthermore, calling it a stablecoin is a language abuse, since USD itself is not a stablecoin... Taking into account the high inflation rate.

Therefore, if you believe in crypto, it will make more sense in the long term to invest into coins having a low inflation rate or offering staking rewards compensating this inflation rate, in order to keep your total asset value growing. These coins can be BTC, ETH, BNB, XTZ or EGLD... Please DYOR as usual.

Below a few referral links to earn more cryptos...