Ever since Bitcoin was launched in 2009, the popularity of cryptocurrencies has boomed. By 2019, cryptocurrency boasted a cumulative market capitalisation of $237.1 billion – and with high-profile developments such as the launch of Facebook’s altcoin Libra on the horizon, this figure seems set to increase.
Although it was initially dismissed as a fad, millions of people around the world now trade in cryptocurrency. Monero, Ethereum, Litecoin, Ripple – there’s a lot more to cryptocurrency than Bitcoin, but it can be difficult to understand exactly what makes each altcoin different.
This article will take a closer look at one of these cryptocurrencies – namely, Tether (USDT). A so-called stablecoin that’s backed by USD, Tether began circulating in 2014. If you’re keen to catch up with the latest USDT news, read on – we’ll be explaining how the relationship between Tether and USD works, and ultimately, which is the better option for traders.
What is Tether?
Tether is a cryptocurrency which is issued by Tether Holdings – a Hong Kong-based platform that enables users to store and send currency around the world. In terms of both trading volume and market capitalisation, it’s the largest stablecoin in circulation. In fact, it surpassed even Bitcoin in 2019, with the highest monthly trading volume of any cryptocurrency on the market.
What is a stablecoin?
A stablecoin is a type of cryptocurrency which is backed by a stable asset. Usually, this stable asset is fiat money (a form of currency which maintains its value as money) such as the US dollar, or a particular commodity such as precious metals or oil. This is designed to reduce the volatility of the cryptocurrency, so that its market value won’t fluctuate wildly.
How does Tether relate to USD?
Tether was originally launched as a stablecoin which would always be worth $1, with a further $1 maintained in reserves for every tether that was issued. In theory, this means that tether would never drop below $1 in value – although the ‘crypto dollar’ was met with controversy when it dropped to $0.90 in value in October 2018, amid speculation that Tether Holdings didn’t have the reserve funds to support it and was using Tether to manipulate the price of Bitcoin. (Some of these claims have yet to be resolved).
Tether Holdings is also preparing to launch the EURT, a form of tether currency which is directly pegged to the Euro. In the coming years, it plans to expand its collection yet again with the JPYT – a tether that’s tied to the Japanese Yen.
What are the advantages of Tether vs USD?
Although other forms of cryptocurrency are prized for their volatility, the USP of stablecoins such as Tether is their relative stability (at least in theory). Because Tether is supposed to be the same value as $1, you may wonder why you would choose to trade in tether over trading in USD. But there are some advantages to the altcoin.
Tether has quicker transaction times
Trading on the stock market or foreign exchange market is often a highly time-sensitive affair. Values can fluctuate by the hour – so having to wait 1 to 4 business days to make USD withdrawals and deposits can be frustrating.
Tether transactions, on the other hand, can be completed in a matter of minutes. As traders in cryptocurrency often need to transfer funds quickly, this can be a huge benefit.
No transaction fees
How much was your last transaction fee? If you’re trading between different currencies on the foreign exchange market, you could be faced with conversion fees along with various other charges. The average transfer cost on financial transactions processed by SWIFT (the Society for Worldwide Interbank Financial Telecommunication) is $30 – which quickly adds up if you’re transferring funds often.
Transferring money between Tether wallets, however, is completely free. There are no transaction fees, meaning each transaction leaves you with more money in your pocket.