What Is Tether USDT and How To Use it
Crypto Basics

What Is Tether USDT and How To Use it

Created 5mo ago, last updated 5mo ago

Tether USDT is a cryptocurrency stablecoin pegged to the USD and is asset backed by USD reserves.

What Is Tether USDT and How To Use it

Table of Contents

Tether (USDT) is an incredibly versatile and often controversial decentralized digital asset that bridges the gap between fiat money and cryptocurrencies. But how did it come to be? And why is it so popular?
In this article, we will dive into the history of Tether and how it works to answer all these questions and alleviate the frequent bouts of Tether FUD that can afflict crypto investors. Ironic for what is supposed to be a stable asset, there’s a lot going on in the world of USDT and the utility it brings to the entire blockchain industry is more important than you may think.

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What Is Tether (USDT)?

Tether (USDT) is a collateralized stablecoin asset issued by Tether Limited and pegged 1:1 to the U.S. dollar, shielding its holders from wild swings in cryptocurrency markets. USDT is also used as a common currency between different exchanges, allowing users to move their funds quickly and conveniently without having to go through fiat currency conversions. Tether tokens can be minted or burned on demand depending on market conditions, with the number of tokens always backed by cash equivalents or other assets such as gold held in its cash reserves.

Is USDT Cash?

While USDT can be used by customers to send and receive payments on various platforms, it is not actually cash in the traditional sense. Rather, it operates more like an IOU; when you buy USDT, you are essentially buying a promise from Tether Limited that they will honor your purchase with the equivalent amount of U.S. Dollars at any time upon request. Then again, fiat currencies operate on the same premise, with the only difference being they are redeemable IOUs from central banks instead.

Although USDT may be exchanged for goods and services just like cash, its true value lies in its ability to maintain its peg to the U.S Dollar and provide users with a reliable way of transferring funds. Digital currency traders and investors require a digital store of value that remains stable if they choose to remain on the sidelines during times of market volatility.

Having USDT on hand waiting to buy a market dip or exit precarious market conditions is much more convenient than moving funds to and from your bank each time you exit or enter the market. Also, the cost of converting fiat to crypto (and vice versa) is expensive compared to merely paying gas fees, as you are dealing with TradFi intermediaries.

Is USDT a Threat to Crypto?

There seems to always be some “Tether FUD” circulating every year or 2, where crypto experts question USDT’s legitimacy and predict its demise. These arguments usually center around 3 points:

  1. That Tether can’t be trusted because Tether Limited and crypto exchange Bitfinex allegedly attempted market manipulation in 2017 to create the bull run by artificially inflating prices or creating fake volume.
  2. That Tether isn’t collateralized in full by US Dollars at a 1:1 ratio, but instead uses dubious assets whose value can’t always be accurately ascertained.
  3. That regulators want to shut Tether down and eventually will find the smoking gun to do so.

While there is some merit in all these claims, some of which previously caused Tether to depeg and will do so again in the case of a bank run.

There’s no argument that Tether’s demise would be catastrophic for the crypto industry, especially since USDC’s recent de-pegging. Of course, Tether also experienced a drop to as low as 80c.

Despite this, the coin's stability has helped it to maintain its lead over competing stablecoins, especially after showing its resilience in the aftermath of the collapse of UST, an algorithmic stablecoin, in mid-2022.

However, there's still a nagging worry that if USDT fails to retain a proper dollar peg, it could cause a ripple effect with massive losses across the broader cryptocurrency market. Users would end up undercutting each other left and right to convert their holdings into different assets. Some analysts believe that if this scenario played out, the fallout wouldn’t be as bad as we think. Regardless of these potential risks, USDT remains a vital component of the larger crypto economy and is likely to continue to be so in the foreseeable future.

Tether (USDT) has always been the first and largest stablecoin in the crypto space, available as native tokens on all big layer-1 chains and nearing a record-high market capitalization of $80 billion at the time of writing. Tether Limited has had a variety of accusations regarding its business model but has claimed to be fully transparent and update its balances and reserves daily. Being such a popular stablecoin for the average degen trader and institutional investor, Tether has become a convenient way to transfer money online.

Tether (USDT) is widely available on nearly every major blockchain, including Ethereum, Kusama, Polygon, Liquid Network, and recently Near Network. If you’re curious why someone would pay to bridge their USDT to different chains, USDT gas fees on Ethereum depend on network activity, while Polygon transfers are basically free, consider this:

If you’re beginning to experiment with DeFi or just want to bridge your safe assets between networks, would you rather own Tether, or a stablecoin exclusive to one blockchain?

What Does Tether Do?

Tether is a stablecoin designed to mitigate crypto market volatility by pegging its value to the US dollar. It serves as a link between cryptocurrencies and traditional fiat by being a static, reliable, digital store of value. Another important role of stablecoins is to prevent value loss in the time from when a transaction is initiated to when it is executed, a situation referred to as slippage.
Without a static currency, there would be no way to ensure loan or liquidity providers that the currency they provide would be worth the same value when the loan is repaid. It would also be impractical for service providers to constantly update pricing information if the underlying currency price kept shifting.

Why Did Tether Depeg?

When Tether FUD is in full flow, it has depegged from the dollar several times in the past, both up and down, depending on which exchange you look at and opening and closing prices. Here is a brief history of the most significant USDT depegs, and the reasons behind them:

How Do Tether Tokens Work?

Stablecoins like Tether are crypto assets that are pegged 1:1 to fiat currencies like the US Dollar or Euro, and backed by real-world assets in full by their issuing company. These reserves must be frequently attested or audited, depending on their jurisdiction, to ensure all stablecoins issued are fully collateralized and redeemable at all times.

Tether ensures that USDT is available on almost all ecosystem chains as native tokens (such as Bitcoin’s OMNI layer, Ethereum’s ERC20 standard, BNB Chain’s BEP20, Tron’s TRC20 etc) to maintain the stablecoin’s ubiquity in markets.

The Chinese Yuan and Mexican Peso also have Tether-backed versions to assist other countries to enter the larger market.

Why Use Tether?

Tether enjoys liquidity on virtually every blockchain that accepts Tether tokens. Its widespread availability ensures that most crypto exchanges will pair their assets with USDT, making them accessible to stablecoin holders. Without consistent pairing with a stablecoin like USDT, traders could be limited in the cryptocurrencies they could purchase, requiring them to swap stablecoins at a loss. For this reason, a glance at the Tether market cap should give you an idea of which stablecoin is best to swap into between trades or to store value.

By holding the most widely available and well-known stablecoin, the odds are greater that your preferred exchange has a trading pair available to you.

Lastly, Tether has proven itself time and time again to be impervious against market conditions and regulatory scrutiny. With its base in crypto-friendly Hong Kong instead of the lately crypto-antagonistic United States, it’s also better protected, currently at least, against the whims of politicians and regulators, as the recent USDC depeg and BUSD suit showed.

Tether History and Founders

In the pioneering age of cryptocurrency, Tether Limited's USDT emerged as a game-changer, initially dubbed Realcoin back in 2014. The brilliant minds behind this innovation were none other than co-founders Brock Pierce, Reeve Collins, and Craig Sellars.

A true entrepreneur at heart, Brock Pierce, dubbed “The hippie king of cryptocurrency” by Rolling Stone in 2018, has left his mark on numerous high-profile projects in the crypto and entertainment spheres, some of them controversially, such as BlockOne’s EOS . As a co-founder of Blockchain Capital in 2013, he played a pivotal role in raising over $150 million by 2017. With an impressive track record of co-founding successful ventures. Reeve Collins led Tether Limited as its CEO during the crucial first two years. His entrepreneurial prowess can be witnessed in his previous projects, including RedLever, an entertainment studio, and Pala Interactive, a gambling platform.

Craig Sellars, a versatile figure in the crypto world, has been an integral part of the Omni Foundation for over six years. The foundation's innovative Omni Protocol empowers users to create and trade smart-contract-based properties and currencies atop Bitcoin's blockchain. Sellars' extensive experience spans various other crypto organizations and companies such as Bitfinex, Factom, Synereo, and the MaidSafe Foundation, showcasing his undeniable expertise in the field.


How does Tether make money?

Tether Limited generates revenue each time you deposit or redeem USDT tokens from their reserves. Assets held by Tether Limited are also partially invested in safe assets such as US bonds and precious metals or loaned out to other institutions.

Does Tether lose or gain value?

The value of USDT should not fluctuate much because it is supposed to be backed 1:1 by USD reserves held by Tether Limited. However, there have been some instances where its value has fluctuated slightly. For example, during periods of high demand, USDT may trade slightly above its intended peg of 1 USD. Conversely, during periods of low demand or when there are concerns about Tether's backing or transparency, the price of Tether may drop slightly below its intended peg.

Is Tether USDT a good investment?

Being an asset-backed cryptocurrency stablecoin has made USDT a safe haven asset for poor market conditions. If your goal is to profit from cryptocurrency trading, a more established currency such as Bitcoin will be a better bet on future financial gains.

Can Tether Really work?

As long as Tether Limited is able to maintain enough dollars in reserve and redeem institutional requests for fiat, USDT coin will continue to trade at $1.

Where can you buy Tether (USDT)?

USDT tokens can be purchased on nearly all cryptocurrency markets including Binance, Kraken, Coinbase, and many others.

Why are hedge funds shorting Tether stablecoin?

The idea of shorting a stablecoin may seem strange at first, but some hedge funds have attempted to take advantage of industry-shaking events to earn a profit. Moments like the TerraUSD (UST) collapse and FTX implosion in 2022 had institutions praying for a chance to flood the market with unpegged Tether coins

What determines Tether’s price?

As long as Tether redemptions are processed, the USDT price will remain $1.

How do you cash out USDT tokens?

USDT coins can be cashed out at any exchange that supports a pair with both USDT and your local currency. Tether Limited will process redemptions from their dollar reserves but only for corporate clients that meet specific criteria and refund their cash equivalent in their chosen fiat currency.

Can you transfer USDT to a bank account?

Once traded to your fiat currency of choice, you can initiate a withdrawal to your bank account from your exchange. Exchanges typically require a withdrawal fee equal to a specified amount of USD.

Can you spend USDT?

USDT payments are possible in many places, including cryptocurrency exchanges and even some retailers that accept it as a payment option. Be aware this will likely require a USDT transaction fee.

How much is Tether's reserve?

According to Tether’s transparency page, Tether has over $85 billion in reserves. At the time of writing, it has $85,661,782,823.14 in total assets and $83,218,992,302.62 in total liabilities. The majority of its reserves are invested in US treasury bills, while gold and Bitcoin represent around 4% and 2% of the total reserves. There is a reserve surplus of $2.44 billion.

Is there USDT mining?

USDT cannot be mined. Tether issues USDT stablecoins by minting and issuing them to KYC-ed users on their official website. Users can also obtain USDT by trading through a cryptocurrency pair on an exchange.

Could the value of USD Tether increase by +5% to 1.2586595 based on the forecasted value?

It is theoretically possible for Tether to depeg upward, but it is extremely unlikely, as institutions would quickly redeem fiat dollars for Tether crypto to sell them until the peg was re-established.

How Many Tether (USDT) Coins Are There In Circulation?

The number of Tether (USDT) coins in circulation currently is 83,218,992,303. Tether holdings on each chain are updated daily.
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