Are the allegations true? Are the people behind Tether using it to prop up the bitcoin market? Could any downfall of Tether have massive ramifications on the Bitcoin Market? But really what makes all these questions about come up? What is so special about (₮)Tether? Stick around, and let’s find out together.
What is Tether?
Tether is known as a hybrid crypto-fiat “stable coin” that has its value pegged to the value of the U.S. dollar as well as other fiat currencies. By leveraging Blockchain technology, ₮ allows you to store, send and receive digital tokens pegged to dollars, euros, and yen. Person-to-person, globally, instantly, and securely for a fraction of the cost of any alternative.
The idea is its stability that surpasses the majority of the other digital coins with massive price swings. It is a cryptocurrency asset distributed by Tether Limited, operating on the Omni protocol as a token give out on the blockchain. As a rule of thumb, all Omni transaction (Tether inclusive) stay in a Bitcoin transaction with the same transaction hash.
What is its Purpose
The main purpose of Tether is to offer liquidity and a hedge against market volatility. It is pegged to a fiat, which ultimately means there ought to be no loss of value or volatility like with other tokens.
Also, this makes the stable coin a lot less risky than the usual cryptocurrencies. The relevance of the ₮ as an alternative to fiat is a huge advantage. It is valued by traders and investors for several reasons. For a lot of investors, Tether provides a path to park their investments in bearish market times, especially in countries where it is difficult to convert cryptocurrencies to fiat.
Several people that trade on exchanges, Bitfinex included use tether to purchase other cryptocurrencies such as bitcoin.
Tether Limited maintains that using this method to purchase virtual currencies lets users move fiat to and from an exchange faster and cheaper. Furthermore, the relationship with exchanges and banks is usually pretty unsteady, and using ₮ is a way to avoid that.
So what exactly is the controversy?
First of all, many have raised concerns that the owners of Bitfinex exchange are the ones that distribute Tether. Critics believe that there should not be that kind of close relationship.
However, the issues somewhat run deeper than that. Fears have been expressed that Tether Limited does not hold sufficient U.S. dollars to back all digital coins that are in circulation.
As of 2018
Tether has been releasing several coins onto the market. Alone ₮ has released more than 850 million new digital tokens. The company was increasing the number of coins in circulation at the time, and that coincided with the record highs in cryptocurrency prices, which caused some critics to suggest that there was price manipulation taking place.
Nicholas Weaver claimed that the increasing amount of ₮ created moved to the bitfinex exchange buying bitcoin and other cryptos – kept the prices up.
To back those claims up, an anonymous statistical analysis looked at the relationship between Tether and Bitcoin price. The results showed that the creation of Tether occurs when bitcoin is falling.
The concerns are legitimate; however, do not allow that to stop you from “going to USDT” if it is the best short-term move for you. The advantages of Tether which are stable like a digital dollar protected by cryptography and not vulnerable to as much speculation as other cryptocurrencies are great benefits in the crypto world.
In the extremely volatile world of cryptocurrency, it is great to have a bit of stability. Hence, Tether is notable crypto.