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For beginners, two frequently asked questions are “What is Tether(USDT)?” and “What is Tether?” Well, these two questions actually have the same answer. Launched in 2014, Tether (USDT) is the token for the Tether platform which is designed to facilitate the use of fiat currencies in a digital manner. Tether is the first and most popular stablecoin. It is a de facto form of cash in the cryptocurrency market.
The value of stablecoins is pegged to some external reference, including fiats and commodities. In terms of Tether, it is pegged against the U.S. dollar and the conversion rate is 1 Tether token equals 1 USD.
Stablecoins help to keep cryptocurrency valuations stable. They enable traders to easily convert their stablecoins into fiat money or other cryptocurrencies. Traders tend to hold Tether and wait for the right time to convert them into other cryptocurrencies. Unlike Bitcoin, stablecoins are not being used as investments, but rather as media of exchange.
How Does Tether (USDT) Work?
So the Tether company claims that USDT has a stable value of $1 USD, but how does it ensure this?
According to the Tether whitepaper, the value of USDT is 100% backed by the company’s reserves. Although USDT is pegged at 1-to-1 with a matching fiat currency (U.S. dollar), its price does not always stay at $1 per USDT.
The number of USDT in circulation will sometimes be bigger or smaller than the number of coins the company is backing at the given moment. So the price of USDT will fluctuate accordingly. To control the price, the company can correct it by either increasing or decreasing the supply, or by adding or removing more money to its reserves.
How and Where To Buy Tether (USDT)
The most popular way to buy Tether (USDT) is to do so through a broker. Most exchanges allow traders to purchase and sell USDT, and trade USDT for other cryptocurrencies. Simply register in an exchange, connect your account to a payment option and place an order.
Besides choosing an exchange, you should also open a USDT wallet. A private wallet is where you can safely store your USDT. The two most common kinds of cryptocurrency wallets are hot storage wallets and cold storage.
Hot wallets are connected to your devices and must be connected to the internet. You can transfer your tokens from one hot wallet to another hot wallet easily. As for cold wallets, they are the safest way to protect your tokens. They are physical devices and not connected to the internet. So hacking tokens stored in a cold wallet is impossible.
Tether Price History
Tether (USDT) coin is the largest stablecoin with a market cap of $62 billion. It is the third-largest cryptocurrency after Bitcoin and Ethereum.
Before March 2020, the number of USTD in circulation remained under $4bn, and those of other major stablecoins were small. But March 2020 witnessed a resurgence in the supply of stablecoins. The spiked demand for stablecoins could be attributed to the rally of Bitcoin and other cryptocurrencies, as more investors convert fiat money into stablecoins to invest in the crypto market. Now the total market cap of USDT is at around $62.bn. In 2020, USDT price mostly stayed under $1.00 and hit as low as $0.999634 on November 22.
Conclusion: Is Tether A Good Investment?
If you are hoping to increase your wealth significantly, investing in Tether is not your best option. This is because Tether and stablecoins alike are “stable” in value. While they are free from price depreciation, they don’t appreciate in price. It is very hard to make a large amount of money simply by taking advantage of price differences. Another way to earn money with stablecoins is staking. But the yield is usually lower than trading other cryptos. Even so, investors should hold stablecoins to avoid market volatility. Stablecoins offer stable places to park your capital. You can simply buy Tether, hold them and exchange them into Bitcoin or other cryptos when the right time comes.
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