Investing in Tether should be seen more as a strategic move within the broader context of a cryptocurrency portfolio rather than a traditional investment aimed at growth. Potential users must consider their objectives and risk tolerance, keep abreast of regulatory developments, and remain aware of the ongoing discussions about the transparency and reliability of Tether’s reserves. Tether serves as a bridge between cryptocurrency and fiat currencies, offering investors a straightforward what is tether method to trade at a one-to-one value with the USD, free from the inherent volatility seen in other cryptocurrencies. Tether Tokens are assets that move across a blockchain just as easily as other digital currencies but that are pegged to real-world currencies on a 1-to-1 basis. Every Tether token is 100% backed by Reserves, which includes traditional currency, cash equivalents, and other assets, including receivables from loans made by Tether to third parties.
Join our free newsletter for daily crypto updates!
According to Tether, whenever it issues new USDT tokens, it allocates the same amount of USD to its reserves, thus ensuring that USDT is fully backed by cash and cash equivalents. This MOU signals a pivotal moment in the advancement of digital asset awareness and understanding across the region. Tether’s future will rely on whether it can maintain market confidence; were its critics to be proved right, a loss of confidence could lead to insolvency for many cryptocurrency exchanges who use it to store value. Relying on an algorithm rather than cash reserves caused TerraUSD to lose its price peg during a major liquidity crunch in early 2022.
Ask Any Financial Question
Currently working as the content lead for Australian startup CryptoTaxCalculator, Patrick has also covered the crypto industry for Canstar and The Chainsaw. Patrick has over seven years of experience in the crypto space and has previously shared his knowledge with the AML and fraud departments of Australian financial Institutions. To the extent any recommendations or statements of opinion or fact made in a story may constitute financial advice, they constitute general information and not personal financial advice in any form. As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of readers. Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Tether also launched MXNT, a stablecoin backed by the Mexican peso following earlier expansions into Europe (EURT) and China (CNHT).
Great! The Financial Professional Will Get Back To You Soon.
Crypto traders use Tether to provide steady, reliable liquidity to get in and out of other cryptocurrency trades without facing unpredictable losses (or gains) from volatile price changes. Tether’s other source of revenue is the interest income it earns from lending its reserves to third parties. Tether lends some of its reserves to other entities, such as exchanges, traders, or institutions, in exchange for interest payments and collateral. These loans are secured by assets that are worth more than the loan amount, and they are subject to margin calls if the value of the collateral drops below a certain level.
- These initiatives will be strategically designed to highlight the efficiency and accessibility benefits of using digital assets in a compliant manner for businesses and individuals across Turkey, the Middle East, and North Africa.
- Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3.
- Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital.
- For example, when one of the most notable stablecoins, Terra’s UST, collapsed in May 2022, other stablecoin prices wobbled on exchanges and USDT fell to as low as 97 cents for a brief period as people panicked and pulled their money out.
- Treasurys, [Tether] stands a far better chance of weathering the current tsunami rocking the digital asset world,” says Marc LoPresti, managing director of The Strategic Funds.
- Many suspect that Tether (USDT) has been used to manipulate the price of Bitcoin on this exchange.