If you want to know how to buy Tether (USDT), you're in the right place. Unlike Bitcoin or Ethereum, which are subject to daily price fluctuations, Tether is a stablecoin designed to maintain a nearly constant value.
Although Tether undergoes occasional fluctuations, most holders are not anticipating price increases. As the name suggests, the advantage of a stablecoin lies more in stability than in price gains.
What is a Stablecoin?
Headlines about cryptocurrencies typically describe wild price movements. However, this doesn't apply to Tether, which aims to have a stable value due to its peg to the US dollar.
Stablecoins like Tether maintain their constant value because they are backed by a pool of assets. In the cryptocurrency world, USDT is referred to as a "collateralized stablecoin."
Raymond Hsu, Co-founder and CEO of Capital, states that the stable value of Tether offers specific advantages.
However, Tether is not entirely free of risks. On May 12, in the aftermath of the TerraUSD (UST) stablecoin crash, Tether lost its 1-dollar peg and dropped to $0.9485 before recovering to its intended one-to-one peg to the US dollar.
What Risks Does Tether Face?
Even though a few cents may not seem like much, this brief price fluctuation demonstrated that even stablecoins in the cryptocurrency world are not foolproof.
"Tether also poses risks because there is no regulation," says Brian Gallagher, Co-founder of Partisia Blockchain. Gallagher points out that there is no public audit to verify whether the reserves for Tether can fully cover the 75.6 billion USDT in circulation.
Should it be revealed that Tether's treasury has only $5 billion in reserves, it would mean there is a discrepancy between what circulates as USDT in blockchains.
A similar situation has already occurred. In October 2021, the Commodity Futures Trading Commission announced that Tether had to pay a $41 million fine for misleadingly claiming that the US dollar fully backed it.
The commission found that between June 1, 2016, and February 25, 2019, "Tether falsely claimed to customers and the market that Tether had sufficient U.S. dollar reserves to fully back every USDT in circulation with the 'equivalent amount' of the corresponding fiat currency."
Despite the controversy, Tether has restored its dollar peg and remains the leading stablecoin with a very high market capitalization.