What Is Tether USDT, the Token With the Record $83 6 Billion Market Cap

At the time of writing, it has $85,661,782,823.14 in total assets and $83,218,992,302.62 in total liabilities. The majority of its reserves are invested in US treasury bills, while gold and Bitcoin represent around 4% and 2% of the total reserves. USDT coins can be cashed out at any exchange that supports a pair with both USDT and your local currency. Tether Limited will process redemptions from their dollar reserves but only for corporate clients that meet specific criteria and refund their cash equivalent in their chosen fiat currency.

Sam Bankman-Fried, CEO of crypto exchange FTX, has previously pushed back against criticism of Tether, pointing to the fact that it is possible to redeem USDT for US dollars. In a nutshell, Tether is meant to work as follows; whenever a user deposits a US dollar to Tether’s account, Tether Inc—the company behind Tether the stablecoin—mints one Tether in return. It’s designed to enable users to navigate the crypto industry without being exposed to unpredictable prices.

These reserves are meant to back the value of each Tether token, providing confidence to users that they can redeem their tokens for US dollars at a 1-to-1 ratio. You can easily buy USDT on most cryptocurrency exchanges, including Binance, OKX and others by exchanging your digital assets for USDT. Typically these are offered by centralized exchanges, and essentially all they do is allow you to buy or sell cryptocurrencies for fiat currencies such as euros or dollars. To do so, you will have to undergo a KYC process to comply with anti-money laundering regulations. Tether tokens can be bought and sold on cryptocurrency exchanges, including Binance, CoinSpot, Bitfinex, and Kraken. All examples listed in this article are for informational purposes only.

While there is some merit in all these claims, some of which previously caused Tether to depeg and will do so again in the case of a bank run. In the moment it de-pegged, there was an imbalance in Curve’s 3pool, a liquidity pool supporting USDT. More specifically, Tether attributed it to a single person borrowing a huge amount from a liquidity pool, opening the door up to arbitrageurs. Tether keeps track of all of the assets across the chains that support it and stabilizes its value to roughly $1 (between $0.99 to $1.00016, on average) using a pegging mechanism.

1. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice.
2. Using centralized exchanges, you will typically be forced to start by using their custodial wallet too.
3. When you purchase $100 in Tether, you would receive approximately 100 USDT tokens and the company would boost its reserves by $100 in order to maintain the 1-to-1 dollar peg.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. As of the date this article was written, the author does not own cryptocurrency. Tether also launched MXNT, a stablecoin backed by the Mexican peso following earlier expansions into Europe (EURT) and China (CNHT). “One Bitcoin today will not be the same price of Bitcoin tomorrow, making it incredibly difficult to create pricing schemas for companies based solely on BTC,” says Bumbera. “Markets have worked through that concept of how comfortable they are—it’s very clear Tether is not backed by dollars,” says James Putra, vice president of product strategy at TradeStation Crypto.

How to Use USDT

A stablecoin can lose its peg, and you could lose all or a substantial amount of your purchase price. When assessing a stablecoin, as with any crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility. USDT tokens can be purchased on how to buy crypto on binance nearly all cryptocurrency markets including Binance, Kraken, Coinbase, and many others. Tether Limited generates revenue each time you deposit or redeem USDT tokens from their reserves. Assets held by Tether Limited are also partially invested in safe assets such as US bonds and precious metals or loaned out to other institutions.

The expansion of Tether data’s AI focus will focus on several key areas. Firstly, Tether data plans to pioneer the development of open-source, multimodal AI models to set new industry standards, driving innovation and accessibility within AI technology. It will also lead collaborations to integrate AI solutions seamlessly into market-driven products, leveraging the technology to address real-world challenges.

New tokens are created only upon request and purchase by customers who have completed a strict Know Your Customer (KYC) procedure. To answer these concerns, Tether commits itself to transparency, having implemented an accessible Proof-of-Reserves mechanism. It also provides information about locked and on-chain USDT tied to blockchain bridges. With USDT you can skip all of that and send funds directly—which is much more convenient for both the sender and receiver.

In 2014, Brock Pierce, Reeve Collins, and Craig Sellars adapted Omni’s tech stack for RealCoin, and later renamed it as Tether. Their Hong Kong-based company, iFinex, also owns the BitFinex crypto exchange. J.R. Willet laid kubernetes vs docker Tether’s foundation in 2012 while exploring ways to build ‘new cryptocurrencies’ on top of Bitcoin. One of the most important, and most tangible use cases of blockchain is as a permissionless p2p transfer of value.

How Tether Tackles Concerns

Some of the most popular USDT wallets include Trezor, Exodus, Ledger and Atomic. If you’re aware of the risks, you may be ready to start exploring stablecoins. Specifically, USDT allows you to enjoy all the fun of making everyday purchases, but without any middlemen, across borders and practically instantly (depending on which network you choose). To understand why this happened, it’s important to note that Tether is responsible for managing assets across several different blockchains and platforms and guaranteeing that those assets are backed by reserves.

What can you do with Tether?

As concerns grow over the monopolization of AI technologies by Big Tech, Tether data, with this announcement, is stepping forward to champion transparency and privacy in AI model development. Tether tokens are assets that move across the blockchain just as easily as other digital currencies but that are pegged to real-world currencies on a 1-to-1 basis. Tether is currently the third-largest cryptocurrency by market capitalization with a valuation of $83.6 billion, commanding 7.5% of the total cryptocurrency market capitalization. In May 2023, Tether’s USDT stablecoin hit an all-time high in market capitalization, surpassing its previous peak level of $83.355 billion in May 2022, according to CoinGecko data.

Tether updates a breakdown of its reserves holdings daily on its website. The company reported holding 84.58% of its reserves in cash, cash equivalents, short-term deposits, and commercial paper; 76.87% of this was in U.S. Relying on an algorithm rather than cash reserves caused TerraUSD to lose its price peg during a major liquidity crunch in early 2022. UST relied on a sister token called Luna plus a huge reserve of Bitcoin to back its 1-to-1 peg. Traders exploited the algorithm that used Luna to maintain the value of UST in order to make quick profits, and the entire system crashed over a matter of days.

The decline was largely driven by investors’ fears that if one stablecoin can break its peg, others can, too. In theory, this means Tether should be unaffected by the volatility that can so dramatically impact the values of other cryptocurrencies, like Bitcoin all about mining bitcoin using your mobile (BTC). Therefore, issuance of Tether tokens is viable on various blockchains with varying capabilities depending on the transport protocol used. The concern is that Tether—which now has a market cap of over $60 billion—props up the price of Bitcoin.

How Do Tether Tokens Work?

It is frequently used by traders and investors as a way to maintain a stable store of value while still holding a position in the market. Ultimately, a stablecoin’s stability is not guaranteed, and the decision to include Tether in a portfolio should be based on careful consideration of individual trading goals, risk appetite, and overall market conditions. It is always recommended to consult with a financial advisor and do thorough research before making any decisions. However, there’s still a nagging worry that if USDT fails to retain a proper dollar peg, it could cause a ripple effect with massive losses across the broader cryptocurrency market.

While stablecoins do require an element of trust, they open the door to innovation and offer new opportunities. Using centralized exchanges, you will typically be forced to start by using their custodial wallet too. That means that when you buy USDT this way, you won’t have ownership over the private keys to your assets. The centralized entity you bought your crypto from will handle that instead and you receive access with an email log-in. Since it operates on decentralized networks, you can also send USDT without the need for a middleman to process your transaction. It’s also available on the most popular blockchains, meaning USDT is extremely popular across DeFi platforms, NFT marketplaces, and countless other blockchain apps.

As long as Tether Limited is able to maintain enough dollars in reserve and redeem institutional requests for fiat, USDT coin will continue to trade at $1. By holding the most widely available and well-known stablecoin, the odds are greater that your preferred exchange has a trading pair available to you. Tether has been at the center of various controversies, particularly concerning its reserves. Initially, USDT was supposed to be backed exclusively by USD deposits, but later disclosures revealed the inclusion of other assets.