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Tether, originally called “Realcoin,” was one of the first crypto to peg its value to a fiat currency ($1 per token) to ease real currency transactions in the crypto world. Hence, it and similar crypto are known as “stablecoins.” Tether is the biggest stablecoin by market cap and can be redeemed for dollars. It also offers a gold-backed crypto called “Tether Gold.
The aim of USDT stablecoin is to always keep its value at $1. It does this by being backed by reserves held by Tether Treasury. However, USDT’s value has fluctuated in the past. It reached a peak of $1.32 in July 2018 and a low of $0.57 in March 2015 due to changes in demand. In a booming crypto market, demand for stablecoins like USDT tends to be low. Tether’s legal issues have also impacted demand. When NYAG took legal action, USDT dropped off its dollar peg by 3%.
Usually, USDT’s price stays close to $1, with minor deviations of $0.01 or $0.02 that are temporary. The supply of USDT is not capped, it is issued based on user demand and Tether’s reserves.
Tether creates stablecoins pegged to real assets or commodities to offer stability in value, especially during volatile markets. Its USDT is pegged to the US dollar but the composition of its reserves, whether they consist of actual dollars or other secure assets, has been questioned. In 2021, Tether paid a $41 million fine to settle claims by the US Commodity Futures Trading Commission that it falsely claimed its digital currency was backed by fiat currencies. Tether has agreed to regular attestation and audits of its reserves, which were found to be invested in high-risk items such as loans and other cryptocurrencies rather than cash or its equivalents.
Tether started on Bitcoin’s Omni Layer and has since expanded to other protocols including Ethereum, Bitcoin Cash, TRON, EOS, Liquid Network, Algorand, SLP, and Solana. Ethereum and TRON are the blockchains with the largest USDT supply. Tether is widely used to buy and sell different cryptocurrencies.
