Ever since it was launched in 2009, Bitcoin may have dominated the cryptocurrency news – but this year, we’re likely to see a lot more written about another form of crypto: Tether.
First established in 2014 by the Hong Kong-based company Tether Holdings Limited, it’s no secret that Tether has long had a controversial reputation. Traders, lawyers, and journalists alike have all warned of the dangers of the so-called stablecoin, from its hushed-up involvement with Bitfinex to its questionable financial backing.
Just last year, it was revealed that Tether USDT – supposedly backed by the strong US dollar – wasn’t really backed at all. (Only 74% of Tether is actually backed by USD, according to Tether Holdings’ lawyer).
But when it comes to trading, it seems these setbacks don’t matter as much as we thought. Despite its controversy, Tether is growing at a staggering rate – with a market capitalisation of over $10 billion.
At the start of 2020, Tether’s market cap was $4.1 billion. This means that it’s seen a growth of approximately $6 billion in just over 6 months! So, why exactly is 2020 shaping up to be the year of Tether? We’ve analysed the latest Tether (USDT) and other crypto news to find out.
1. Tether USDT bridges the gap between crypto and fiat
As digital technology has advanced and the world rapidly turns to the convenience of online banking, flaws with fiat currencies have become apparent. Remember that Bitcoin was launched in the first place to bypass third-party intervention with digital transfers – something that can make sending money online slow, laborious, and expensive.
In theory, stablecoins such as Tether enable users to enjoy the benefits of both blockchain technology and fiat currency. It’s a lot easier to exchange Tether, as a stablecoin token, than it is to exchange Bitcoin or other more conventional cryptos. It’s also now possible to exchange Tether for US dollars – though so far, it seems few people have actually taken this up.
2. Tether USDT can be transferred quickly
Another benefit of Tether USDT is the fact that it can be transferred quickly. While dollars and other fiat currencies can only be transferred via wire bank transfer – a process which can take between 1 to 4 business days, on average – moving Tether between wallets is a much quicker process. In fact, the transactions are often complete within a matter of minutes.
It’s this speed which makes Tether so popular. Now that platforms such as online casinos support Tether payments, this enables users to carry out rapid transactions. When someone can receive a payment in USDT and spend that same payment just a few minutes later, why would they choose to use USD?
3. Tether USDT is more stable than other cryptocurrencies
For all the valid concerns that have surrounded Tether USDT (and its company Tether Holdings Limited), Tether is still classed as a stablecoin. Although it might not be 100% backed by the US dollar – as the founders of Tether Holdings Limited insisted on claiming for years – a backing of 74% is still a valuable form of insurance.
Cryptocurrencies that are not remotely backed by fiat currencies are subject to huge levels of volatility. Between October 2017 and January 2018, for example, the price of Bitcoin reached record levels of volatility, hitting 8%. (This was measured using a volatility index, and doesn’t mean that the price itself rose by 8%. As we have recently seen price changes of 8% can happen in as little as 5 minutes!).
By roughly aligning the value of Tether with the value of the US dollar, it’s possible to control inflation and volatility a lot more closely.
As Tether becomes more and more popular amongst traders, could it be that the stablecoin has shaken off its unfavourable reputation for good?