5 things to know before buying a hitch

ByRichard C. Sloan

Jul 3, 2021

With a market capitalization of over $ 60 billion, Tether currently ranks third among cryptocurrencies. It is still far behind market leaders Bitcoin and Ethereum, but it is well ahead of several popular coins, including:

It’s also easy to find, as you can buy it on most of the best cryptocurrency apps and exchanges.

Unlike these other cryptocurrencies, the price of Tether generally holds at $ 1. This means that investing in Tether is not like investing in a typical crypto. Here is a complete introduction with all the important information about it.

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1. Tether is a stablecoin linked to the US dollar

A stablecoin is a cryptocurrency linked to another asset. Many stablecoins, including Tether, are pegged to the US dollar. It’s supposed to be of equal value, with 1 Tether worth $ 1.

Since the price of Tether is supposed to reflect the dollar, it is not the type of cryptocurrency that you buy and hold in the hope that the price will rise.

2. It can be used to buy crypto, money transfers, or earn interest

Tether may not be a good cryptocurrency investment, but it has several other uses. Here are the most common reasons to buy it:

  • Purchase of other crypto-currencies: Transferring money from a bank account to a crypto exchange can take days. If you want to keep funds in your account to buy crypto without delay, you can buy Tether. Then all you need to do is use your Tether to make the purchase.
  • Money transfer : If you want to send money between crypto exchanges or wallets, Tether is a good option. You can do this to transfer money between your own foreign exchange accounts or to send money to someone else. Tether does not charge fees for transactions between Tether wallets (although there are standard blockchain fees).
  • Earn interest: Some crypto exchanges pay interest if you lend your crypto, and it’s possible to earn 25% interest by lending coins. The advantage of doing this with Tether is that its value shouldn’t fluctuate. With most cryptocurrencies, you can earn interest, but you could still lose money if the price of the crypto you lend goes down.

3. The company behind, Tether Limited, is controversial

Tether may seem secure since it is a stable part, but you should be careful about this. The company that issues it, Tether Limited, does not have the best reputation.

A major problem is its reliability. Tether Limited previously claimed that each Tether was backed by $ 1. This later turned out to be a lie. In March 2021, Tether Limited released information on its reserves, which showed that only 2.9% of Tether is cash-backed.

Tether Limited has also been the subject of a lawsuit for an alleged cover-up related to a crypto exchange called Bitfinex. Tether Limited and Bitfinex are owned by the same company. According to the New York attorney general, when $ 850 million disappeared from Bitfinex, it drained at least $ 700 million from Tether’s reserves to cover the loss.

The case was settled with the owner of Tether Limited and Bitfinex paying a fine of $ 18.5 million. The companies have neither admitted nor denied any wrongdoing.

4. There are allegations that Tether was used to manipulate the price of Bitcoin

Critics at Tether have claimed that stablecoin is being used to inflate the price of Bitcoin. To understand how he could do this, it is important to understand how the Tether diet works.

Tether Limited has full control over the sourcing of Tether. Unlike cryptocurrencies like Bitcoin, where new coins have to be mined, Tether Limited can release as many new coins as they want. He claims he strikes coins according to the amount needed. But as we have seen, the business is not known to be 100% transparent.

It is possible that Tether Limited could mint new coins and then use those coins to buy Bitcoin. This would allow the company to obtain Bitcoin with non-existent money and also increase the price of Bitcoin.

5. The price has fluctuated by $ 1

The price of Tether is supposed to be $ 1. For the most part, it has retained this value. However, there were times when it was more or less worth it.

The reason is supply and demand. If crypto prices fall and investors want to sell their most volatile coins, demand for Tether may rise and the price rise. We saw this happen in 2020, when Tether’s price briefly jumped to $ 1.06. And negative news on Tether has driven the price down in the past; it was worth $ 0.90 for a short time in 2018.

In such situations, Tether Limited may adjust the offer to synchronize the price. The thing to keep in mind is that legally there is no guarantee that the Tether you buy will be redeemable for $ 1.

If you are looking for a stablecoin, Tether is the most popular choice. There have been concerns with the company that issued it, so it’s something to consider before deciding to buy Tether for anything other than a quick transfer.


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