The USDt (Tether) price and why stablecoins are on the rise
If you’re a crypto investor already, you don’t look for a Tether price prediction. It’s a stablecoin, so the price of USDt will always be $1.00! As a result, the trading volume of Tether and other stablecoins has taken over a huge portion of the cryptocurrency market!
We’ll start by talking about stablecoins and their important role in the crypto space. Then, we’ll explain how they keep a constant 1-to-1 dollar value. As you’ll see, even stablecoins involve risk, as the Tether price has dropped a few times back then.
The cryptocurrency trend now faces a lot of uncertainty as its adoption spreads throughout the world. In response, some crypto bears have withdrawn to the relative steadiness of stablecoins. Investors should know what this means for the digital asset.
Tether steadies the crypto market (a bit)
Find out more ⬇️https://t.co/vcrhBI6mF5
— Tether (@Tether_to) February 11, 2021
Cryptocurrencies are well-known for their wild price movements. Check CoinMarketCap and click a crypto coin. See the price go up and down within seconds! You could see it for yourself.
This could make trades difficult for investors. How can you agree on an exchange if the prices move this much? Fortunately, stablecoins are there to help make sense of the crypto market.
As the name suggests, these cryptos maintain a $1.00 value. This facilitates trades in the market. For example, you may turn your bitcoins into stablecoins, then spend that on Ethereum.
They’re not just useful within the crypto space but in the real world too. Here’s a list of its other purposes:
- Guarding against inflation – Economies stopped in response to the pandemic, causing prices to skyrocket quickly. This caused some investors to convert their fiat bucks into stablecoins. As a result, this will reduce the purchasing power of fiat currency.
- Helping exchange platforms – These are sites that let people buy, sell, and store cryptos. Without stablecoins, investors will have a hard time using their services.
- Everyday spending – More stores allow cryptos as a payment method nowadays. Some prefer stablecoins, though due to the consistent price.
- Easier money transfers – Stablecoins reduce transaction times and costs. It also helps migrant workers to send money to their homes easier.
How the Tether price stays at $1
Stablecoins are steady because of their backing. The prices are supported by various means. You may classify stablecoins accordingly:
- Fiat-backed – Each coin is backed by US dollar or other fiat monies. For example, the Tether price remains at $1.00 because it’s tied to USD.
- Commodity-backed – These stablecoins make it easier to invest in gold and silver. Due to widespread inflation, more investors want these assets.
- Crypto-backed – As the name suggests, these are pegged to other cryptocurrencies. They’re often backed by bitcoin or ethereum since they’re the biggest ones. To keep the coin stable, their supply is lower than their BTC or ETH reserves.
- Algo-based – These are “backed by math” or algorithms, making sure the stablecoin responds to market conditions.
Why are stablecoins becoming popular?
Cryptocurrencies are here to stay, and more people realize this. Major companies are adopting these digital coins. El Salvador has even allowed bitcoin as legal tender.
This is also why crypto exchanges have seen an increase in trading volume. While prices dropped recently, the market is still booming as a whole.
This caused more stablecoin exchanges within the last 30 days. They made up 67% of the market’s trading volume. Specifically, Tether (USDt) did well lately.
It’s the largest stablecoin based on market capitalization. At the time of writing, the market cap was $61.9 billion. It’s also #3 on the cryptocurrency list. Of course, the Tether price is $1.00!
Tether’s not the only stablecoin that did well, though. USDt alone made up 62.48% of the recent trades. Most of these involved trading for BTC and ETH.
GUSD gained 56.7% more trading volume during those 30 days. More popular stablecoins such as BUSD grew 18.9%, while USDC went up by 10.7%.
Why is Tether in trouble?
Stablecoins aren’t as reliable as they seem, though. During the bitcoin crash this year, the Tether price went down to $0.80! It’s not the only time this has happened.
In 2018, the price of USDt fell to $0.925284. How come stablecoin prices fall despite their namesake? Experts said it was because Tether didn’t share details about its USD holdings.
- Doubts regarding Tether – It recently announced that its reserves are a mix of US dollars and corporate debts. Some investors felt uneasy since they expected a 1-to-1 ratio between USDt and USD. There are other possible reasons for Tether’s decline:
- Response from other countries – A month ago, China’s crackdown arrested more than 1,000 people who used Tether for money laundering. Hong Kong did the same on July 16, 2021.
- USDC’s rise – Other stablecoins are becoming more popular, especially USDC. It’s also used more often for on-chain applications than USDt.
Should I still invest?
Does this mean you should stay away from stablecoins? Of course, not. There’s no such thing! If you’re looking for risk-free investments, stop.
There’s always a chance you’ll lose money. Let’s take gold, for example. Many people think it’s a foolproof way to beat inflation. Yet, there are two reasons why it isn’t:
- Gold supply isn’t predictable – A third of the world’s supply is made up of scraps. These are pieces of jewelry that people sold for cash. Back then, people melted their valuables to have more gold. If there’s too much gold, it won’t guard against rising prices.
- It’s useless during hyperinflation – Gold is good once the extreme price increases end. During those periods, essentials like food are more valuable. For example, people sold their gold for food during the Weimar hyperinflation.
This doesn’t mean you shouldn’t start investing. On the contrary, you must start now! You have to be careful about what you add to your portfolio.
Study how assets work before investing in them. Make sure you invest in multiple asset classes! See if it’s a worthwhile investment based on your needs and the current situation.
The internet lets you learn about cryptocurrency for free. Understand how these digital coins work. You’ll see that they have far more uses than just “internet money”!
A quick Google search will show you numerous websites. You don’t have to go that far, though. Why not check other cryptocurrency articles from Inquirer USA?
Note that our articles are not meant as investment advice. Please research by yourself before investing. Never use the money you’re not willing to let go.
Learn more about the USDt (Tether) price
How much does Tether cost?
It’s tied to the US dollar, so it’s $1.00. Sometimes, it may dip in value for a variety of reasons. It happened back in 2018 and 2021.
Which is better: USDC or USDt?
All stablecoins have risks. That’s why it’s ideal to choose several instead of one or two. That way, you can reduce potential risks from these coins.
Is Tether a good investment?
If you’re looking for profit, you shouldn’t invest in Tether. You’ll only need it for buying more lucrative cryptos. If you want to preserve your buying power, Tether could help.
Disclaimer: This article is the author’s personal opinion, differing from the “official” statements or facts. All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by Inquirer.net constitutes an investment recommendation, nor should any data or content published by Inquirer.net be relied upon for any investment activities.
Usa.inquirer.net strongly recommends that you perform your own independent research and/or speak
with a qualified investment professional before making any financial decisions.