With the cryptocurrency market going haywire every other day, some cryptocurrencies are bound to lose value rapidly while others might straight up get obliterated. Before you buy crypto, it is extremely important that you do your research and make informed choices when it comes to your money and portfolio. So let’s take a look at the cryptocurrency markets, tokens that are doing well and the ones that aren’t.
What Is Tether?
Tether (USDT) is a cryptocurrency, much like bitcoin. The USDT chart, based on market value, shows that tether is the third-largest digital currency in the world. But it differs significantly from other virtual currencies like bitcoin in various aspects.
Tether is a stablecoin and in contrast to other cryptocurrencies, which are known to be volatile, these digital currencies or stablecoins are linked to tangible assets, such as the U.S. dollar, to preserve a steady value. The value of the dollar was intended to be the Tether’s benchmark. Tether’s price typically equates to $1, unlike the value of many other cryptocurrencies, which sometimes change. This isn’t always the case, however, and fluctuations and the decline of tether’s value has been alarming for investors in the past.
As an alternative to using dollars, cryptocurrency traders often utilize tether to purchase cryptocurrencies. This essentially gives investors an opportunity to seek protection during periods of extreme volatility in the cryptocurrency market via a more stable asset. However, owing to the lack of regulation around cryptocurrencies, many institutions steer clear of working with exchanges that deal in digital currencies.
What Is Currently Going On With Tether?
Lately, the USDT chart shows that tether is struggling in the cryptocurrency market because traders are losing faith in the asset. Due to world events and certain situations in the market, stablecoin activity has drastically decreased since the liquidity situation gained widespread attention recently. This has affected tether as well. A different stablecoin, the USD Coin (USDC), on the other hand, immediately rose to the top 10 and is poised to overtake USDT at any moment.
Recently, Tether has faced severe backlash and has drawn criticism for keeping the assets in its reserve a secret, publishing its first reserve breakdown only in May 2021. This caused the investors to hurriedly trade their Tether for Circle’s USDC as a consequence of what their first reserve publishing would do. Due to the fact that USDC had previously undergone an audit and was fully guaranteed by US Treasury bonds and cash, people placed their faith in it and made the shift.
Apart from the audit, Circle offers money transfer services as well. In addition to 46 other state regulators in the United States, it is registered with FinCEN. Circle is audited by Grant Thornton, a renowned international accounting company and as a consequence, the company is required under money transfer rules to submit its reserves to the government.
Although this was more obvious in its early days, the USDT has a history of dipping below or over its $1 peg during periods of significant market volatility. However, this is only a pattern noted in extremes and not regularly. Paolo Ardoino, the chief technical officer of Tether, said in June that one of the top 12 accounting firms would conduct a complete audit of the stablecoin platform’s reserves. But if present patterns of its decline continue, Tether’s hegemony in the stablecoin market could be over. This puts Tether’s future in massive jeopardy and some even say that tether might soon disappear from the cryptocurrency world. In order to promote a smoother, more seamless trading experience with greater liquidity for USD and USDC, Coinbase revealed that the company will be unifying USD and USDC order books. This has become particularly concerning for USDT as it is yet another incentive for investors to choose USDC over it.
Having said this, the value of tether has not budged over the last 6 months. This is not to say that the cryptocurrency hasn’t faced any ups and downs, it simply means that crypto has managed to make up the difference and regain its value. If you are someone who prefers stability and security over short term profits, stablecoins are the way to go. Ensure that you do enough research before making any decisions and investing your money as the crypto market is inherently volatile and full of risks.