Should Investors Invest in Tether?
While many stablecoins are tied against the U.S. dollar, Tether is the most well-known. At the time of writing, it’s the third-largest cryptocurrency by market capitalization. In terms of the daily volume of trading, it’s the top one and even beating Bitcoin. If you’ve thought about buying Tether or wondering why many people buy it for the current USDT to INR price, let’s take a closer look at the coin to determine if it’s worth the investment.
Is Tether a thing?
Tether is a stabilized coin or cryptocurrency which is tied to an asset. In the case of Tether, this asset is none other than the U.S. dollar, and 1 Tether is intended to have a value of $1.
A company known as Tether Limited controls Tether. It’s accountable for controlling Tether’s supply, ensuring that there are reserves to support the Tether tokens issued, and maintaining a stable price.
There were times when Tether was valued at greater or lesser than $1. Tether Limited has had its own share of issues (we’ll go over them in the following sections), and some have led to the price falling to as low as $0.90. In contrast, when prices for cryptocurrency fall, the demand for stablecoins could increase and boost the price of Tether.
It is important to note that the well-known Tether Limited doesn’t provide any legal assurance that 1 Tether can be traded for $1.
Uses that Make Tether Relevant
The concept that lies behind Tether is to convert your money into a reliable digital currency. Perhaps you’re wondering what’s the significance as there’s not a chance for massive profits as it is with other forms of cryptocurrencies.
Well, there are many uses for Tether. Here are the most popular:
The main advantage of this crypto is that anyone across the globe can transfer cash quickly and for a minimal cost. International payments, however, tend to be expensive and take a long time. But with the majority of cryptocurrencies, the value of what you pay may change when the recipient receives it. Tether is a solution to this issue since it has a fixed cost.
Using cash for cryptocurrency transactions is costly and may take days to complete. A better alternative is to use Tether to trade in crypto. You can buy Tether to store in your exchange account and then trade it in for cryptocurrency whenever you need it. If you own a cryptocurrency that you don’t wish to convert into cash at the moment, like Ethereum to INR or ETH, you can trade it in exchange for Tether rather than selling or converting it.
Many crypto platforms allow you to lend your crypto, including the likes of stablecoins, in exchange for interest. Rates of interest can be pretty high, and some are making 25% of their earnings by lending out coins. The advantage of this method using stabilised coins is that they don’t have to be concerned about their rate of decline like you do with other cryptocurrencies.
Problems with Tether
Although Tether might appear secure because it’s a stablecoin, it has issues. Let’s take a look at them below:
The reserves of Tether
The reserves of stablecoins are crucial. If the entity issuing it doesn’t have enough reserves to support the coins it’s issuing; the coin is basically being created from thin air.
The reserves of Tether Limited were the focus of a lot of discussions, and unfortunately, Tether Limited has lied about it previously. Tether Limited said that each Tether was one-to-one, backed by one U.S. dollar. But it turns out it wasn’t.
In 2019, Tether Limited’s lawyer disclosed that 74 % of Tethers were secured by cash or cash equivalents. In 2021 Tether Limited issued a reserve breakdown that revealed only 2.9 % of Tethers were supported by actual cash. The remaining reserves are made up of different assets, such as the commercial paper market, secure loans, and corporate bonds.
Do you need to buy Tether?
If you’re looking to buy stablecoins, Tether is the one of most popular choices. In most cases, it has remained at the cost of $1. However, when it has been fluctuating, it’s been able to get and return to $1 quite quickly.
But, considering that Tether Limited hasn’t proven itself to be reliable, it is possible to consider a different stablecoin. On the top cryptocurrency exchanges, you will find numerous alternatives that aren’t plagued by the problems Tether has encountered, like:
- USD Coin
- Gemini dollar
The firms that run each stablecoin regularly release information about their reserves.
There are a lot of stablecoins that are available. It is important to find one you can trust and is especially important if you are planning to hold funds or loan it out.