The Tether stablecoin has, by its own standards, been on something of a rollercoaster ride lately. The crypto, which is designed to be worth $1 at all times, slipped below its peg following an attack .
Although it recovered, it has been away from the dollar, albeit by fractions of a cent, over the last few weeks over concerns that the crypto would experience a mass sell-off over fears that USDT would be the next crypto targeted by the United States Securities and Exchange Commission (SEC).
But what is Tether (USDT)? How does Tether work? Let’s take a look and see what we can learn, and also examine why Tether price predictions are a little more straightforward than the average crypto.
Tether was the first stablecoin when it launched in 2014. The idea behind it is related to the inherent volatility of cryptocurrencies.
While crypto enthusiasts are quick to sing its praises, in their hearts of hearts they will admit, if only to themselves, how fast, and how far, the price of coins and tokens can move can be somewhat disconcerting, especially when they are going down.
Tether was created in an attempt to solve this problem and create a kind of best-of-both-worlds solution.
If you had a crypto, which could offer its users privacy and the ability to operate financially without having to worry about centralized banks and other financial institutions, but that stayed pretty stable, that could, potentially, work for everyone.
Tether’s USDT is one such cryptocurrency, the first backed stablecoin of any note. Although it has inspired a swathe of similar stablecoins, it is still the biggest.
People who want to get hold of Tether can get their money and give it to Tether Holdings, who give them the equivalent amount of USDT in return.
If the original money is in US Dollars then, at least in theory, they should get back the amount of Tether as they handed over in fiat. Tether Holdings, again theoretically, holds onto the money in the event that the investor wants to sell their USDT back.
One of the issues with Tether is that, in the past, there has been some controversy over what Tether’s reserves consisted of.
However, an independent audit , carried out on 31 March 2023, found that the organization had reserves worth $89,833,149,345, of which more than $53 billion comprised US Dollars, and that its assets were larger than its liabilities.
One interesting thing to note about Tether is that it operates on the Ethereum (ETH) blockchain.
Technically speaking, this means that it is a token, rather than a coin. However, since the term “stabletoken” is yet to make the crypto dictionary, people do refer to it as a coin, even if that is not precisely accurate.
Let’s take a look at some of the more dramatic moments in the Tether price history . Keep in mind that there aren’t terribly many of them, as the crypto has, to its credit, done a pretty good job of staying pegged to the dollar throughout its long – at least for a crypto – history.
There have been some exceptions, however. For instance, in 2017, it sank to around $0.91 and in December the following year it was worth $1.02. However, most of the time, it has been at, or at least incredibly close to, $1.
One notable exception came in May 2022 when, following the collapse of the Terra blockchain and the depegging of the UST stablecoin, it fell to $0.95 before recovering to its peg.
Recently, Terra’s price has proven to demonstrate a bizarre combination of stability and volatility. While it has remained very close to exactly $1, it has rarely been worth precisely that much.
For instance, on 5 June, the day that the SEC announced its legal action against Binance, it went from a high of $1.0006 to a low of $0.9994, a loss of about 0.12%.
While this may not seem like much in general terms, it represents a relatively large swing considering the crypto should, ideally, be worth $1.
Similarly, on the day of the attack – 15 June – it fell by even more, going down 0.43% from $1.0001 to $0.9958.
On 20 June, it was worth $0.9999. With 83.17 billion USDT in circulation, it had a market cap of $83.15 billion. This made it the third-largest cryptocurrency, and the largest stablecoin, by that metric.
One thing that is very important to note is that, because USDT is a stablecoin, there is not much point in making a Tether price prediction. This is because, as a stablecoin, it is designed to be worth $1, or at least as close to $1 as possible, at all times.
Therefore, any website that works properly should, at least in theory, say the same thing for a Tether price prediction for 2023, a Tether price prediction for 2025 or even a Tether price prediction for 2030 – $1.
It all depends on what you want from a crypto investment. If you are looking for something that will keep its value – something that, for instance, can serve as a useful crypto to trade for other blockchain-based coins and tokens, then it might be.
If, on the other hand, you want to make a profit, then, all being well, USDT is probably not for you.
Hopefully not. The crypto is designed to be worth $1, or at least very close to it, at all times. It is audited and should, theoretically, be able to withstand a pretty substantial run on it.
However, there is always a risk that it could go under, so you will need to do your own research before getting involved in it.
It should also be pointed out that, if you are looking to invest in crypto because you genuinely believe that coins and tokens are capable of exploding in price, then Tether will likely disappoint you.
If it does rise substantially above $1, then something will have gone drastically wrong.
This is a decision that only you can make. Before you do so, make sure you do your own research on other stablecoins, and remember that you must never invest more money than you can afford to lose.
On 20 June 2023, there were 83.17 billion Tether in circulation.
USDT is backed by assets including, but not limited to, fiat US dollars.
Someone might buy Tether if, for instance, they wanted to buy cryptocurrencies without having to go through the process of converting their crypto holdings into fiat, or vice versa, every time they wanted to buy or sell cryptocurrency.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.