Tether is a stablecoin, which is a type of cryptocurrency designed to follow the value of a specific fiat currency. Every Tether coin should always be worth exactly one unit of the fiat currency.
We are going to focus on the U.S. dollar version of Tether, or USDT. There are versions for other currencies, including the euro and even gold. Keep reading to learn the important details about the Tether cryptocurrency, whether it may be useful in your cryptocurrency strategy, and why it courts controversy.
On May 12, 2022, amid sharp declines seen throughout the cryptocurrency market, Tether lost its peg to the dollar, sinking to as low as 95 cents before recovering to around 99 cents.
What Is Tether?
Tether is a stablecoin pegged to the United States dollar. At any moment, you can quickly exchange other cryptocurrencies for Tether to remake your cryptocurrency holdings or send Tether to other cryptocurrency wallets anywhere in the world.
As a stablecoin, Tether should always be equal in value to its underlying currency. In this case, one Tether USDT is equal to one U.S. dollar.
Special Features of Tether USDT
The main special feature of USDT is that it introduces the stability of fiat currency into the blockchain. That makes it useful for storing or transferring value, as it is always worth the same price and its owner doesn't have to worry about losing purchasing power. Bitcoin, Ethereum, and other popular cryptocurrencies fluctuate in value based on market supply and demand. With USDT, it’s always worth a dollar by design.
The Tether parent company claims to hold assets equal to the total outstanding market value of its currency. That means it has a dollar in cash or highly liquid investment assets for every one USDT in circulation. If you trust Tether and its accountants in the Cayman Islands, that makes it a great alternative to regular USD for many purposes, including international remittances and trading crypto without converting back into dollars. But there are enough questions about Tether’s assets and motives that it’s essential to read the controversy section below before going all-in on USDT for your banking needs.
Because of its asset-backed nature, Tether isn’t minable. New Tether is issued to verified users who make fiat currency deposits. This service was eliminated for those in the United States on January 1, 2018.
However, once in the crypto marketplace, it trades like any other currency using blockchain technology. That means you can buy and sell Tether through any cryptocurrency exchange that supports USDT.
|Circulating Supply (as of 5/12/2022)||82.80B USDT|
|Special Feature||Value pegged to the U.S. dollar, works on multiple blockchains|
How To Buy Tether
Tether is a unique coin in that it works on multiple blockchains. That currently includes Bitcoin (via Omni), Ethereum, Tron, EOS, Liquid, Algorand, SLP, and Solana.
If you send Tether between wallets, make sure to use a compatible wallet. You can’t send ERC-20 USDT to an Algorand wallet, for example. But you can send to compatible wallets at any time.
The easiest way for most people to acquire Tether is through an exchange that supports USDT. As a popular stablecoin, you can find Tether at most major crypto exchanges. Just don’t pay more than a dollar per coin, plus network and exchange fees, or you’re likely getting a bad deal.
Because Tether works with multiple blockchains and is widely used, you have a ton of options when it comes to storing your Tether. That includes software, hardware, and paper wallets. If you want fast access for buying and selling, it’s important to keep your Tether in a wallet that’s connected to an exchange. For long-term storage, any secure cryptocurrency wallet can keep your assets safe.
According to Kraken, USDT transfers take place in as little as two minutes on the TRC2- blockchain.
|Tether Version||Processing Time||Number of Confirmations|
|Tether USD (USDT) ERC20||5 minutes||20 confirmations|
|Tether USD (USDT) TRC20||2 minutes||20 confirmations|
Fees and Expenses
Tether network fees are determined by the blockchain you use. If you’re trading on the ERC-20 (Ethereum) blockchain, you’ll pay Ethereum gas fees. If you trade other versions, costs will vary.
If you’re an international user and want to get verified to work directly with Tether, the fee is 150 USD in Tether tokens for verification, plus fees of up to 0.1% per fiat deposit or withdrawal.
While many cryptocurrencies have not brought on too much controversy, Tether has a more complex history. Tether is closely intertwined with cryptocurrency exchange Bitfinex, with both sharing CEO JL van der Velde and other executives.
It is this close relationship that had researchers suspect price manipulation in Bitcoin using Tether and Bitfinex.
The New York Attorney General investigated both Tether and Bitfinex alleging that despite its claims, Tether was not backed by equal U.S. dollar reserves. The two companies were also charged with allegedly covering up $850 million in missing funds and misleading investors about their currency backing.
In February 2021, Bitfinex and Tether agreed to pay $18.5 million to the State of New York and meet new transparency reporting requirements to settle the matter without admitting or denying the charges.
In October 2021, the Commodity Futures Trading Commission (CFTC) fined Tether $41 million over misleading claims of U.S. dollar reserves. It also fined Bitfinex $1.5 million.
While these new rules should protect investors, it’s wise to take caution holding an asset or working with a company previously involved in fraud.
On May 12, 2022, Tether USDT lost its 1:1 peg to the US dollar, with the stablecoin briefly sinking to as low as 95 cents. The crash came days after the price of TerraUSD, another popular stablecoin, fell to as low as 30 cents. Although the price of Tether recovered to 99 cents, the drop shook the confidence of many crypto traders.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
CoinMarketCap. "Tether (USDT)."
Kraken. "How Can We Help?"
John M. Griffin and Amin Shams. "Is Bitcoin Really Untethered?" The Journal of Finance.
New York Attorney General. "Attorney General James Ends Virtual Currency Trading Platform Bitfinex's Illegal Activities in New York."