Is USDT a Stable Stablecoin?

With a market cup of over $66 billion, Tether (USDT) is the most popular stablecoin. If you’re interested in trading cryptocurrency but don’t want to deal with the volatility of Bitcoin or other coins, Tether may be the solution you’re looking for. The question is whether this stablecoin is truly stable and reliable, or it’s just an elaborate scam like TerraUSD. Let’s take a closer look at Tether to find out what it’s all about — including how it works, the surrounding controversy, and what the future holds for USDT.

What Is Tether?

Tether is a stablecoin launched by Brock Pierce, Craig Sellars, and Reeve Collins in 2014. It’s based on blockchain technology and issued via the Omni protocol. With a circulating supply of over 66 billion, Tether is the most widely-used stablecoin in the world.  

The Tether project was created to provide an alternative to fiat currencies and other crypto projects like Ethereum. It serves mainly as a reinvestment tool to reduce volatility within the crypto market and store value.  

USDT is a ticker symbol of Tether. USDT is pegged to the USD, meaning it has a 1:1 value to USD. You can buy and sell USDT on many crypto exchanges, including Binance, Bitfinex, Gemini, and Kraken.

Controversy Around USDT

Tether is based in Hong Kong. However, The location of Tether headquarters is disputed.

Despite its popularity, Tether is one of the most controversial cryptocurrencies. Some crypto experts claim that it’s not backed by USD at all and is just another crypto scam.

In 2018, the Bitfinex exchange lost access to $850 million due to a crackdown on a shadow bank the exchange was using. To help fill this massive money hole, Tether loaned Bitfinex $600 million backing USDT. This move has made many investors wonder about the true origin of USDT reserves, which to this day remain undisclosed.

In 2021, Bloomberg published an investigative article alleging Tether of being partially backed by short-term Chinese corporate debt. Tether representatives dismissed the allegations without giving a piece of evidence to prove otherwise. However, after the TerraUSD 2022 cash, Tether announced that the project is preparing the USDT’s full audit to improve the transparency of its reserves.

Another thing that concerns some investors is Tether’s regulation. While some stablecoins were created through regulatory processes and are considered regulated, USDT was not regulated by any government. However, it doesn’t stop the USDT to BTC trading pair from being one of the most traded pairs on the market. 

The Future of Tether

The future of Tether is uncertain. The company has never been audited, and its transparency has been questioned since the beginning. However, many users still use USDT as a stablecoin that can be exchanged for US dollars. The company has also made many promises in recent months, including having its financials audited by a third party. 

Tether’s price hasn’t always been stable. In April 2017, USDT plummeted from $1 to $0.92, causing it to lose 9% of its value. In December of the same year, Tether’s price went to the highest it has ever been and stood at $1.07. Since then, USDT has had some ups and downs, but it has managed to defend its stablecoin standard of 1:1 to a dollar.

Today, USDT remains the most popular stablecoin on the market — and its price is still at $1. However, until the project can prove its transparency, there will always be skepticism surrounding it.  

Some crypto experts believe USTD won’t go away anytime soon. Sources like Digitalcoinprice predict that Tether will be traded for $1.01 at least till 2031.

Should You Use USDT?

The USDT stablecoin is not a good investment choice for long-term investors. The market has shown an overwhelming preference for Bitcoin. With the introduction of other competing cryptocurrencies like USDD and Zcash, Tether’s position in the market may become even more precarious.

Zcash offers a similar service but has been deemed as having better security than Tether. Other stablecoins can also be used as alternatives when you don’t want to rely on currencies that proved to be unreliable in the past. If you are looking to exchange your USDT tokens for Zcash, the decent idea is to use an anonymous cryptocurrency exchange for the sake of your privacy.

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