Tether: How Market Volatility Is Fueling The Rise Of A Fiat-Backed Cryptocurrency
The massive surge in popularity for cryptocurrencies in late 2017 was largely driven by their volatility. The ability for anyone to invest in an exciting, volatile market with minimal regulation attracted droves of people hoping to become overnight millionaires on the crypto markets.
Presently cryptocurrencies are used primarily as a vehicle for investment, speculation, and quick profits, instead of being used as stable currencies for everyday transactions. All of the volatility is beginning to create an unlikely contender in the cryptocurrency markets:
Tether (USD₮) has its value backed by US dollars, arguably making it the least volatile major cryptocurrency. For over two years, it's price has largely stuck at $1 USD, with the biggest fluctuations dropping it down around $0.92 USD or up to $1.05 USD during times of heavy trading.
Tether, a coin with low volatility whose value is backed by fiat currency, is doing exceptionally well in a market that thrives on volatility. It now ranks as the third most traded coin by volume, narrowly trailing Ethereum.
Source: CoinMarketCap.com
There's very little money to be made on a non-volatile cryptocurrency like Tether. 1 Tether will always be worth more-or-less 1 USD. So why is it being traded so heavily?
For exactly that reason. Every other cryptocurrency is in a constant state of flux, and sometimes investors need stability. The obvious fix is to move your funds back into USD, but this brings up all sorts of regulatory requirements (And fees) in order to move out of cryptocurrencies and back into fiat. By investing into Tether, investors still have the stability of USD when they need a temporary break from the markets, but they don't have to worry as much about capital gains, taxes, and regulatory requirements that come with jumping back and forth between fiat and crypto.
Tether can't be mined, Tether isn't volatile, and Tether isn't going to make you a crypto millionaire.
These qualities are what might one day make Tether the first real cryptocurrency. So far we don't have cryptocurrencies. Not in the real sense of the word. What we're playing with right now are crypto investments, and we're a long way off from seeing any sort of stable-priced cryptocurrency that isn't backed by fiat dollars.
If you enjoy my posts, don't forget to upvote and
Thanks for reading,
-Matt
Interesting, I was not familiar with this coin
Tether (USDT) doesn't get much attention from investors looking for profits, since it's more of a utility coin than an actual investment - It's only used for stability while switching between one investment to the next. This is also why we see such a massive trade volume relative to the total supply - Very few traders are holding this coin since there's not much potential for profit, but many people are using it as an intermediary between other currencies.
On any given day, the trade volume of Tether is nearly twice its market cap:
Tether (USDT) is also controversial since there's no easy way for them to prove that they have enough fiat currency to back up the USDT that they've issued without revealing where their money is being stored. Revealing their bank accounts/financial backers would present a huge risk for them if a government decides to attempt to force regulations onto cryptocurrencies. However, as long as the majority of stakeholders continue to treat 1 USDT = 1 USD, it still serves as a viable medium of exchange, regardless of Tether's actual financial state.
This is very similar to US dollars - If everyone tried to withdraw their physical cash from the banks at once, the banks would quickly run out of physical currency to represent the value. However, since only a small fraction of the currency is being represented in cash at one time, the system continues to function.
@OriginalWorks
The @OriginalWorks bot has checked the text of this post and it appears original!
To call @OriginalWorks, simply reply to any post with @originalworks or !originalworks in your message!
Thank you @weaselhouse for making a transfer to me for an upvote of 4.83% on this post! Half of your bid goes to @budgets which funds growth projects for Steem like our top 25 posts on Steem! The other half helps holders of Steem power earn about 60% APR on a delegation to me! For help, will you please visit https://jerrybanfield.com/contact/ because I check my discord server daily? To learn more about Steem, will you please use http://steem.guide/ because this URL forwards to my most recently updated complete Steem tutorial?
This post has received a 2.38 % upvote from @boomerang thanks to: @weaselhouse
You got a 0.93% upvote from @postpromoter courtesy of @weaselhouse! Want to promote your posts too? Check out the Steem Bot Tracker website for more info. If you would like to support development of @postpromoter and the bot tracker please vote for @yabapmatt for witness!
When Bitcoin price drops, Altcoins drop more and Tether holds steady.