Tether is the name of one of the many cryptocurrencies that have been released. But why is this one special? The people who have created the cryptocurrency claim that each token that gets issued is backed by one US dollar. In 2014, Tether was issued on the Bitcoin blockchain and there have been a lot of questions about reliability and legitimacy surround it ever since then.
Stability of the Token
The idea of being backed by the US dollar is driven by the idea of creating a stable cryptocurrency that is not so heavily influenced by factors that determine the price. This is what people call with the name ‘stable coin’ – it relies on the stability of the fiat currency.
Application of the Tether
Even though this is not one of the most popular names in the cryptocurrency industry, the Tether is still something most of the crypto traders use. This is due to the fact that many cryptocurrency exchanges hold the account balances of their clients not in fiat money, but in USDT – Tethers. This can be explained by the fact that banks are still very cautious in their relationship with cryptocurrency providers and exchanges.
You are most likely to have a balance in Tether tokens instead of US dollars or any other cryptocurrency. This is because the cryptocurrency provides stability when it comes to alternatives, has the same low volatility as the dollar and allows for the denomination of account balances without actually having to maintain a relationship of this kind with a bank or another financial institution.
Contradictions About the Tether
The main worry people have about the cryptocurrency is whether its owners have enough USD at their disposal to back the whole amount of tokens that have been released. This topic has been the subject of many speculations. The main one being that if that something goes wrong with the Tether, the whole cryptocurrency market will feel the impact.
The cryptocurrency exchanges will be influenced the most if the Tether crashes. This is because they predominantly denominate the accounts in this cryptocurrency. This could lead to a significant drop in prices of crypto assets across exchanges. The other thing that could happen, would resemble something like a ‘bank run’
If the Tether coin loses its value, people will require their funds back and this cryptocurrency will no longer be able to support trading on cryptocurrency exchanges.
But even though there are many speculations and things that are still unclear about this asset, industry analysts and active participants believe that even if the shock is big, the field can overcome it. This optimistic prognosis stems from the fact that the industry has been through many turbulent events. And it is still standing strong.
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