Tether Capitalization Growth (USDT): Risks and Expert Opinions

Tether (USDT) Quick Facts

The Tether platform was launched in 2015. The mission of the platform and its self-titled token is to provide full analogs of fiat currencies (dollars) in the blockchain environment. This eliminates the risk of volatility inherent in cryptocurrencies since it allows you to buy USDT and pay less to the intermediaries when the market falls, instead of accessing the cache. Similarly, during the recovery, it is easier and cheaper to buy the desired cryptocurrency for USDT than to convert a fiat dollar. Subsequently, a large number of similar stablecoins linked to fiat currencies, gold, and other assets appeared.

Brief

• Website: https://tether.to
• Start of trading: August 7, 2015
• Place by capitalization: 3
• Current market cap: $ 9.2 billion
• Share in the total market capitalization: 3.5%
• Average daily turnover: $ 20 billion
• Current USDT Turnover: 9.2 Billion
• Mining: NA
• Type of tokens: ERC-20, Omni, TRC-20.

Cryptocurrency is stored on wallets that support Omni Layer, as well as on the official platform https://app.tether.to/app/login. Most often, Tether is held on exchanges when you need to wait out a dump of the market. Tether is traded on almost all major and small exchanges, and now it is much more difficult to find a platform where USDT is not present.

Key benefits of Tether:

• cash security, constant publications on the volume of reserves;
• fast transactions;
• high liquidity;
• decentralization;
• transparent, open transactions;
• there is no transfer fee between wallets within the system;
• besides the dollar, stablecoin is pegged to the euro and the yuan;

The main stablecoin received much attention since its launch. And not always this attention was able to benefit the company. A connection between Tether and the Bitfinex exchange was found, and the main cause for concern for token holders was the doubt about providing money supply. After that, at the beginning of 2019, Tether management said that the cash wasn’t the only collateral. At that time, the share of cash was only 74%, while the rest was loans from affiliated companies.

Capitalization growth over the past six months

The stablecoins, and most notably USDT, sharply increased their capitalization during the COVID-19 period. This is due to the analogy of a safe haven, when it is better to go into quasi-cache than to suffer losses. At the beginning of the year, the total capitalization of all stablecoins amounted to $4 billion, but now this amount fluctuates around $11 billion. The increased demand for stablecoins provoked issuers for an additional issue of tokens. Since Tether occupies about 85% of the market, its capitalization allowed it to occupy the third line of the Coinmarketcap rating.

Gregory KLUMOV, founder and CEO of STASIS, talks about whether there are concerns about the growing share of stablecoins in the structure of the crypto market:

“The stablecoin market growth comes as great but expected news. The demand for the most popular industry's stablecoins including Tether had risen since the crisis started. The revelation is simple: more institutional investors, along with mainstream users, wanted to shelter their funds. Even though the C19 pandemic is not a hot topic anymore, this trend continues: mainstream adoption is happening, and people will be more comfortable switching gears if anything unpredictable occurs again. Think of fiat-backed stablecoin as your lifeboat in a volatile ocean of traditional finance and seas of cryptocurrencies”.

Joe FLANAGAN, Lead App Developer at GetSongbpm, informs about unexpected risks for USDT:

“Right now, it seems like Tether will continue to grow, but the actual value and “health” of real world currencies do play a role. With the current epidemic we are facing, economies throughout the world are constantly facing troubles – which means there are risks when it comes to a cryptocurrency that is anchored to these currencies.”

Since the company’s collateral consists of the dollar, euro and RMB, theoretically, serious problems in one of the economies will undermine Tether’s capitalization, and worse, it will provoke the USDT exchange rate to fall below $1. Such problems can be severe deflation or default on bonds, but this is hardly believed. In the long run, all this, of course, can happen, but it is more likely that Tether will have more mundane problems in the form of unfair play, as in the case of Bitfinex, tax problems, or legislative difficulties.

USDT is an ambiguous cryptocurrency, but some still consider it a good payment option. So, on June 29, transfers of $ 300 million were made in it. But Tether also had security problems. Likewise, the absence of 100% collateral, which was originally announced, poses risks. And the more capitalization grows, the stronger the temptation to create partial redundancy bypassing its own standards. History knows cases when gold coins were diluted with impurities, and this did not lead to anything good for the currency. Tether can learn this from its own experience.

Therefore, even though USDT remains the leader among stablecoins, it is most likely temporary. If financial corporations, such as banks, enter the market, Tether will have to give way to them. The fact that banks have their reserves will cause much less doubt than the still-young company Tether.

Image courtesy of: MyBitcoin