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Tether Explainer: The 3rd Largest Cap, a Stablecoin Put into Perspective

By jedryccc | OMG - Online Money Guide | 23 Jun 2020


A Stablecoin

A stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both world’s—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies. -Investopedia

Tether (USDT) as a stablecoin is designed to be pegged to the value of a dollar, so like DAI, its value should just be around $1. These kinds of coins try to alleviate the volatility that other cryptocurrencies like Bitcoin and Ethereum which have fluctuating prices. 

USDT outgrows XRP

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Just last month, Tether surpassed XRP in market capitalization. The stablecoin now has a market cap of more than 9 billion dollars. The recent Bitcoin having was one factor as people prepared to buy perhaps large amounts of Bitcoin. One factor in the success of a stablecoin is trust. Tether is pegged to the US dollar. People count on Tether to stay around the same value of a dollar. Stablecoins like this one are used in exchanges especially if fiat currencies take time or are not allowed.

Digital Money for a Digital Age

That is how Tether's site describes itself. It is this promise that brings many people to Tether. As a very dependable stablecoin backed by the dollar, the cryptocurrency also had a first mover advantage due to to it being one of the first. In 2014, there was talk of how problematic it was to move between fiat and crypto in exchanges, thus, the idea of a bridge between them was born. A currency to tether fiat and crypto was born, Tether.

Shady Stuff

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Tether has been wrapped up in many controversies. Some people allegedly tried to use the stablecoin to do price manipulation. Research by John M. Griffin and Amin Shams in 2018 suggests that trading linked with growth in the amount of tether and trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.

JL van der Velde, CEO of both Bitfinex and Tether, denied the claims of price manipulation:

"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex."

Bloomberg Reportes found evidence that prices were manipulated. Red flags included small orders moving the price as much as larger orders with oddly specific numbers, going to many decimal points. These oddly sized orders could allegedly have been used to signal wash trades in automated trading programs, says New York University Professor Rosa Abrantes-Metz and former Federal Reserve bank examiner Mark Williams.

Just use DAI

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We use DAI here on Publish0x and it's not connected to some kind of shady company with a lot of controversy. DAI is backed on the Ethereum blockchain where smart contracts can be viewed. If the controversy surrounding Tether bothers you, use DAI.

Where do I get Tether (or DAI)

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Many cryptocurrency exchanges like Binance offer an option to buy or convert to stablecoins. Many wallets like Atomic Wallet can also allow you to convert to DAI and other stablecoins. With stablecoins you can quickly do trades or exchanges on the blockchain without the need for fiat currency.

Not all cryptocurrencies are volatile, some are tethered to something. Invest in stablecoins that you know are tightly and securely tethered to something.

 

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jedryccc
jedryccc

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