Tether
is the world’s largest stablecoin, a cryptocurrency that found a way to
become immune to price volatility – something that is troubling pretty
much every other coin on the market. It first became popular in early
2018, after the crypto winter started and investors needed a safe haven
asset, but were unwilling to withdraw their money from exchanges because
they still expected new opportunities in the industry.
Instead,
they gave way to the era of stablecoins – cryptocurrencies backed by
real-world assets that can afford to remain stable even during the
periods with the greatest volatility and disturbance in digital currency
prices. With Tether being the largest to date, let’s talk more about
the coin and see how it helped the crypto industry become what it is
today.
What is Tether and why is it such a big deal for investors?
Tether (USDT)
is the world’s largest and highest-ranking stablecoin that can boast of
the largest trading volume in the entire crypto industry. As such, it
even outperforms Bitcoin (BTC) and Ethereum (ETH) when it comes to volume, although it is still below both coins in terms of the market cap.
At the time of writing, on March 9, 2021, Tether
sits as the fifth-largest cryptocurrency, with a market cap of $36.8bn.
Its volume in the last 24 hours is at $95bn, although it often goes
beyond $100bn, particularly in periods when the crypto prices are
failing, and investors opt to turn to stablecoins to preserve the value
of their investments. During such times, people would exchange their
cryptos – Bitcoin or altcoins – for USDT coins, and “wait out the storm”, only to re-invest in their coins of choice at an opportune moment.
As
a stablecoin, Tether is pegged to the US dollar, with $1 backing each
of its coins. With a real-world asset giving it value and securing it,
each USDT coin
will always be worth $1. The coin’s value should not be subjected to
change, although it does slightly fluctuate from time to time.
In theory, 1 USDT
equals $1. However, in reality, people are sometimes engaging with more
or less coins that the company is backing at the given moment. This
sometimes allows its price to go slightly above or below $1, although
Tether, the company behind USDT, quickly corrects it by either adding
more money to its reserves or by removing it.
Another way to control the value of Tether is to change its
circulating supply. So, if the company has more money in its accounts
than coins in circulation, it can increase the supply to match the funds
in the bank, and vice versa, or burn some of the tokens if there are
more USDT coins than dollars in its account. That way, it can manually
prevent inflation, but this also means that Tether can never be
decentralised.
Indeed, the coin was criticised many times for its
centralisation, and it was even involved in controversies as the firm
constantly seems to find excuses not to go through audits. While this
has pushed some users away from Tether and towards other stablecoins,
many are either unaware of the issue, or simply do not care enough to
sacrifice the convenience of USDT.
Advantages of using Tether
Other
than its price stability, Tether has a number of additional advantages.
For example, its availability. The coin is widely accepted in the
crypto industry, and it is present on most, if not all exchanges. This
makes it a go-to coin for users who wish to invest in cryptocurrencies
that are not paired against the most popular cryptos, like Bitcoin, Ethereum, and Litecoin (LTC).
Tether
is also very easy to exchange into USD and vice versa, thus
representing one of the biggest gateways into the crypto industry. There
are even exchanges that do not allow users to buy coins with fiat
currencies directly. But, even these platforms support Tether, so it is
easy to buy USDT somewhere else, transfer the coins to other exchanges
and invest in altcoins that interest the user.
Tether’s stability
means that it is immune to volatility, and it is also a go-to coin when
prices of altcoins start to drop. Everyone goes for Tether to avoid
losing their money, as waiting for Bitcoin or altcoins to rise again and
match the price they had when they bought them can sometimes take
years.
Finally, Tether’s supply can change depending on the need,
and this feature also allows it to maintain its price stability under
any circumstance.
Tether downsides and controversies
As
for the downsides, we’ve already mentioned some of them, such as the
lack of transparency. Tether is doing its best to avoid audits, and no
one knows why, which makes trusting it a bit difficult.
Then,
there is also the fact that it is centralised, while decentralisation is
the whole point of inventing the crypto industry in the first place.
Lastly,
Tether was hacked in November 2017, when it lost nearly $31m to unknown
attackers. The hack did not involve customer funds, but it still had an
impact on the coin’s credibility. Of course, you can look at the
incident from another angle as well. Typically, projects that get hacked
and manage to recover are less likely to get hacked again, as they,
presumably, managed to patch the flaws and strengthen their security.
So, being hacked way back in the day has actually made Tether stronger,
in a way.
We also mentioned that Tether was involved in certain
controversies, and the bad news is that they are still not resolved.
There were accusations some time ago that the company, in partnership
with Bitfinex, manipulated the crypto market in 2017 to push Bitcoin to
$20,000 per coin. The alleged conspiracy even forced Attorney General
Letitia James to order Bitfinex and Tether to end all activity in the US State of New York.
Both companies were also accused of making false statements about the
backing of USDT, indicating that a lot of people who hold USDT coins
might have worthless cryptocurrencies. With Tether refusing to allow
audits, no one but its officials knows how much money the company
actually has in store.
Even JPMorgan joined the growing group of
Tether critics, although nothing has been proven or disproven as of yet.
The only thing that is known as of right now is that Tether managed to make a deal
with the state of New York, which was reported around February 23.
Bitfinex admitted to no wrongdoing, and it announced that it only cares
about resolving the matters and putting a stop to the trials. The
exchange decided to pay $18.5m and put an end to the matter once and for
all.
Tether price prediction: will the coin ever go past $1?
Usually,
making price predictions for stablecoins does not require a lot of
effort. Tether’s value, for example, is always supposed to be $1 –
that’s what makes it a stablecoin. However, the recent Tether (USDT/USD)
price forecast noted that the coin might not be so stable after all in
2021. So, let’s see what the Teher price prediction says, and what
Tether future price might look like.
According to Trading Beasts’
USDT forecast, Tether will indeed see an increase in price, which will
sit at $1.2827 on average by April 2021. It will continue to grow by
only a fraction of a cent, leading up to December 2021, when it will be
at $1.2829. The maximum price could even go up to $1.60710 according to
the same prediction.
As for the coin’s average price in years to follow, the service
expects it to go to $1.28655 by December 2022 and to $1.28832 by
December 2023. Unfortunately, they do not offer hints at what could
drive Tether’s growth.
So, will the Tether price rise in 2021?
Another price forecasting website Wallet Investor actually offered the
opposite opinion to that of Trading Beasts. Its USDT price prediction
claims that the coin will drop to $0.9999 over the course of the year.
As for Crypto Ground, the popular website did not offer Tether future
price at all, likely expecting the stablecoin to stay at $1, where it
is supposed to.
So, will USDT go up? It is possible. If the
crypto industry enters another winter period, it is more than likely
that people will rush towards Tether and other stablecoins in search of a
safe haven. But, it is unlikely that the coin’s price will remain as
high for as long as TradingBeasts predicts. Instead, it is far more
likely that they will simply release new coins into circulation and
accommodate for the growth in demand.
What does the future hold for Tether?
While
the “witchhunt” has indeed ended and the dust has already managed to
settle, the truth about these controversies never actually came out.
However, the crypto industry moves fast, and Tether is still a massive
brand within it. As such, there is little doubt that the coin will
continue to dominate as the world’s largest stablecoin, and a go-to coin
for investors in need.
Neither the company nor its coin have ever
failed investors openly. As for whether or not they were involved in
price manipulations, or if there is truth to other controversies — no
one can say but those allegedly involved, and they continue to deny the
accusations. In the end, investors will act pragmatically, and they will
continue to use Tether as long as it meets their expectations, and
satisfy their needs, so the coin likely has a long future and massive
levels of adoption ahead of it, unless it starts failing investors and
traders.
So, is Tether a good investment in 2021? Possibly. It is
certainly going to be useful during the bearish periods of the crypto
market. However, the Tether token
is not supposed to go up or down, as USDT price should always remain
the same, and as such, it is not a coin you invest in in order to make
money. It can be useful when it comes to saving money or reaching some
further corners of the crypto industry, and the only growth anyone can
expect to see from it is in adoption and usage.
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