Five Important Things to Know Before You Buy Tether

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Tether is a blockchain-powered platform that allows you to store, send, and receive digital tokens that are linked to fiat currencies and commodities such as gold. Every tether is backed up 1 to 1 by traditional currency held in reserves. Tether (USDT) converts cash into digital currency in order to anchor or tether the coin’s value to the price of national currencies such as the USD, EUR, and JPY. Tether is based on the premise that as long as there are other traders willing to exchange their digital currency for fiat money, you will be able to sell your coin. As the value of bitcoin rises, an increasing number of people are looking for ways to obtain some of the digital currency. Many people just buy from exchanges like Coinbase and Binance with fiat, but there is another option that will save you a lot of money. Purchasing tether is a simple way to exchange cash for cryptocurrency while avoiding bank transfer fees and delays the next time you want to purchase cryptocurrency at this platform.

Before you go all out and buy a tether, here are a few things you should know:

1. Tether is a stable coin.

Stable coins are digital currencies that are linked to other assets such as the US dollar or the Euro. Tether is known as a stable coin due to the fact that it is pegged to the US dollar. Tether Holdings, in theory, keeps the dollars in order to return them to anyone who wants to send in their tokens and get their money back. According to their consolidated reserve report as of September 30, 2021, nearly all of the money that had entered the tether ecosystem since the previous reporting date had been kept in cash and bank deposits or treasury bills, indicating a significant decrease in commercial paper investments. This also means that the price of tether cannot grow, which may be a disadvantage for investors hoping to profit from coin growth. Due to its nature as a stable currency, Tether’s value is fixed at $1, which means the only type of growth investors may benefit from in terms of Tether is a rise in the value of the dollar, and this would only be when the investor wishes to convert to another currency because a dollar will always be a dollar. This enables it to be used as a medium of exchange and a means of storing value rather than a medium of speculative investment.

2. They’re mainly used as payment vehicles.

Many exchanges lack the relationships with traditional banks required to offer regular currency deposits or withdrawals, but they can and do accept stable coins like Tether. Investors have stated that they hold tether in order to trade in other cryptocurrencies. This makes a lot of sense because trading cryptocurrency pairs on the exchange is much easier than initiating a bank transfer whenever you want to buy a cryptocurrency pair. The use of USDT instead of the US dollar eliminates transaction costs and delays that impede trade execution in the cryptocurrency market.

3. 99% of all tethers are owned by people who use them to trade on exchanges. 

People with high stakes in cryptocurrencies seem to trust tether. They buy billions of tethers and use them to facilitate the trading of other coins. Tether is used by crypto investors who want to avoid the extreme volatility of other cryptocurrencies while keeping value within the crypto market. By moving value to USDT, a trader might reduce their risk of exposure to a sudden drop in the price of cryptocurrencies since it is much quicker and cheaper to transfer BTC into Tether than into the US dollar.

4. One USDT token is equivalent to one US dollar held in reserve by the parent company, Tether Ltd., which is based in Taiwan.

The company that issues the currency, Tether Ltd., takes in dollars from people who want to trade crypto and credits their digital wallets with an equal number of tethers in return. There are currently 77,591,578,542.388 USDT tokens in circulation. However, there have been controversies regarding the validity of Tether’s claims about their USD reserves, at times disrupting USDT’s price, which has gone down to $0.88 at some point. 

5. The minimum amount of tether that can be issued is $1. 

Each USDT token is redeemable for a corresponding US dollar held under custody by Tether Ltd. The total value of USDT is said to be equal to the reserves held by Tether. 

Despite having major issues in the past, tether continues to be a very stable cryptocurrency that is stronger for having gotten past its problems, mostly unscathed.

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