Tether (USDT) Cryptocurrency Risk vs Reward
Here, we'll take a deep look into the Tether (USDT) cryptocurrency. We’ll examine the origins, track record, and usability of this popular cryptocurrency. The crypto market dips that we have experienced lately have made it clear that the need for options to reduce exposure to market fluctuations on the crypto exchanges is real. The question becomes, how reliable are the options available today. Let's dive in a take a closer look at Tether.
What is the Tether Cryptocurrency?
Tether is currently the most popular crypto that is anchored to the U.S dollar’s value. As you may already know, the price of Tether is fixed to the price on the U.S dollar at a 1:1 ration. This allows cryptocurrency investors to store value without the risk of market fluctuations.
Tether was Founded in November of 2015 by Philip G. Potter and Giancarlo Devasini. Since then Tether has seen its market cap grow from $250,000 at its start, to around $1.6 billion today with no signs of slowing. Tether is closely tied to the Bitfenix cryptocurrency exchange, but is now available on nearly all cryptocurrency exchanges used today.
Is Tether Cryptocurrency Safe?
Some are skeptical of Tether due to, what some believe is, a lack of transparency. In November of 2017, leaked documents, known as the Paradise Papers, revealed some previously unknown facts about the origins of Tether. According to the documents that were leaked, Tether was incorporated in the British Virgin Islands. Some believe this was done for liability and tax protection purposes.
Tether has faced questions from critics aimed at its solvency. For example, if we see a major dip in the crypto markets, could Tether really back each of its USDT coins with U.S Dollars? This is a question that many critics have asked.
To help answer this and other questions, Tether released an accounting document that was meant to put the public at ease. A New York Times lawyer, Lewis Cohen, has pointed out that the accounting document released by Tether may be carefully worded as to not clearly state that each USDT coin is backed by $1.
Is Tether Cryptocurrency Useful?
The usefulness of Tether is clear, but it is important to also take into account the risks of using this crypto as a store of value. Some have even argued that the downfall of Tether could lead to a crash in the crypto markets as whole. If those concerns are warranted, or are simply overreactions has not yet been seen.
What is clear, is that it's always a good Idea to reduce risk where possible. Only you can decide how much risk you are willing to expose yourself to in return for the advantages that using Tether provides.
What to you think about Tether?
Are you currently holding Tether to store value on or off the exchanges? Are you concerned with any of the issue exposed by the Paradise Papers? Do you think that there is a better and/or safer way to get the same service that Tether provides? Please share you thoughts in the comments below.
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I think the idea behind Tether is quite innovative. How they plan to hold a 1:1 ratio to USD though, especially during market fluctuations is an idea I cannot seem to understand. The crypto-currency market is unregulated and highly volatile, as such, I feel as though both up-and-coming and existing cryptos should always be fully transparent. Any hint of suspicion or fowl play would act as a deterrent of my investment. I am fairly new to trading crypto and as such, based on my research and the online reviews from reputable sources I decided to stay away. It was just one of those things that I never got into, or believed in enough to get into. I am a firm believer in the concept "hodl". If you have a good coin and did your research, you'll be fine :)
Correction of fowl play to *foul play ^_^
Good comment - a core value of transparent blockchain technology is to minimize trust in counter-parties. Holding an asset off chain embeds trust as a condition to the value. There will always be risk in that.
Also I think you can edit comments btw.
Thanks :), still learning
Tether provides a good opportunity for the crypto community to govern itself. I sure don't have the perfect answer at this point but I believe we have enough time to address this together. The worst possible course of action is to do nothing. If regulators see this blow up and Americans lose a lot of money they may regulate against our interests.
I've made the individual choice to use bitUSD as my dollar equivalent. It's fully transparent and collateralized on-chain rather than some off-chain promise from a bank!
I agree with you when you say the worst course of action is to do nothing. The Crypto Community should band together in these case of events and form a solution. I do not believe "Regulators" should have any say in the Crypto space.
Great post!!!
Did auditor withdrawal happen after this was written (can't quite follow the timelines as there is a lot of 'chat' around)? I think that certainly doesn't help people's confidence in it.
I guess another issue is that crypto-crypto trades are regarded as disposals thus being taxable events for capital gains (at least in the US and UK to my knowledge).
Otherwise, my main issue is that its primary use seems to be people trying to time the market e.g. "oh no it's a bear market, I'll put my investment in tether until we hit the bottom of the dip"
@davidhay I think I share the same view as you. To me this seems so practical and useful, but everyone seems afraid of it, thinking its some sort of scam. Personally I don't quite understand why everyone is so afraid of it, but I do know that many who are afraid, are much much much much more knowledgeable on the cryptocurrency space than I am. I just don't know enough and for me if I don't know , I don't take the risk. May I ask if you're invested in it at all? Other than the few points outlines in your article what else is so scary about this? Those points don't scream out to me scam, but only mildly hint at it. Why is everyone so afraid of this?
I think Tether is a good project trying to bridge the gap between the fiat "stable" currencies and the cryptocurrencies because right now there's no way to fast transit between those two due to many reasons (political, economic, regulatory, etc.) which is very critical in this highly fluctuating market.
Thanks for great content as always!! You have single handedly helped me and many others make wiser decisions in the "Space"
For that I thank you Sir!!
What I do not understand, @davidhay, is WHY they would do it. Most people working in Crypto (or anywhere) do it for financial gain. A few do it for technological advancing for the human race (thanks Mr. Buterin).
Tether does neither. They don't make money OR progress the Blockchain-Technology. So why would they spend all this time making it. That's my primary concern.
Bridging the gap, offering stability against volatility, any niche coin may have a future ahead of it. Why does iohk develop only open-source projects with tailoring to specific projects left too project specific developers? Conglomeration of tools is strength in a decentralized network, as is a niche market.
Yes I use tether, only on exchange. I also use exchange coins, as they seem to be less effected by market drop and rebound quickly say for binance coin.
My position is to lower loss from the drop during the bear market movements by swinging out of btc into tether or exchange coins(timing specific if exchange coins dropping I swing tether) then swing back into alts/btc increasing my coin count. Then I send excess gain to my storage device leaving only my original float on exchange to play with during bull market.
I divide my trading allowance amongst 5 exchanges seems to be safer then all in one yet my results vary, so far successfull but I’ve only been doing this method for 3 months.
Great Post! I wonder if people are using USD more now that the Tax laws changed in the US. Some people used USDT thinking they would avoid creating a "taxable events". I have never bought USDT, and I'm staying away from Bitfinex... it seems like a disaster waiting to happen.