- Home
- Cryptocurrency
- Articles
- What is Tether and should you invest in it?
What is Tether and should you invest in it?
Tether (commonly denoted as USDT) is a stablecoin hosted on several blockchains like Bitcoin, Ethereum, Tron, and Solana. A stablecoin is a cryptocurrency whose value is tied to the value of another cryptocurrency, fiat currency, or a commodity like gold.
Tether was one of the first stablecoins to be launched. Its value is tied to a fiat currency, the US Dollar (or USD), which is why it was named USDT (USD Tether). Each Tether token is pegged at a 1:1 ratio with the US Dollar, so one USDT would always be equal to one USD, irrespective of the fluctuations in demand.
There are five Tether crypto tokens in circulation today - USDT, EURT, MXNT, CNHT and XAUT. The value of each is pegged at a ratio of 1:1 to the US Dollar, Euro, Mexican Peso, offshore Chinese Yuan, and a troy ounce of gold, respectively.
Disclaimer
This article is over two years old, last updated on July 21, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.
What is the purpose of stablecoins like Tether?
Cryptocurrency prices are subject to market speculation and are known to be highly volatile. The volatility in prices has been one of the primary reasons for the slow adoption of crypto by many people. When Tether was introduced, it quickly became popular as a means to bridge the volatile nature of cryptocurrencies by pegging crypto to a real-world currency.
Tether combined the best of two worlds, the stability of fiat currencies and the neutrality of the blockchain technology, by pegging the value of a Tether token to USD and operating it over a blockchain.
After the launch of Tether, various other stablecoins have been launched to allow people to digitise traditional currencies and use them over the blockchain without worrying about the volatility of the crypto market.
How to buy or trade Tether tokens?
Tether tokens can be purchased using fiat currency by creating an account on Tether's official site Tether.to or using a crypto exchange platform that lists Tether tokens. You can also swap other cryptocurrencies for Tether tokens using a crypto exchange platform or transfer them from one wallet to another.
When a purchase request is placed through Tether.to or a crypto exchange platform, Tether issues new tokens and sends them to the user's wallet address. The amount of tokens issued is equal to the deposited amount minus the transaction fee. These tokens can then be used for financial transactions, transferred, traded, or just stored.
You can also exchange your Tether tokens for fiat currency through your Tether.to account or an exchange platform. When you exchange Tether tokens for fiat money, Tether removes these tokens from circulation and then deposits an equal amount in fiat currency to your linked bank account.
Some people might consider Tether (USDT in particular) to be a safer investment than other cryptocurrencies because it is pegged to the USD's value. Keep in mind that being a stablecoin doesn't make Tether any less risky than other cryptocurrencies.
Holding USDT in your crypto wallet isn't the same as holding US Dollars, for example. Even though the value of USDT is linked to US Dollars, there's no guarantee that Tether would have enough money to pay out every investor if lots of them decided to swap their Tether tokens for US Dollars.
Even though Tether says on its website that every USDT is backed by its reserves of cash and cash equivalents, in reality, only a small percentage of this reserve is held in cash. Therefore, just because Tether is a stablecoin doesn't mean it has zero risk. This doesn't mean you should not buy Tether or other cryptocurrencies if you want to; but you must do your research to take a calculated risk with your money.
It's worth remembering that Tether cannot be considered an investment in the conventional sense. It is a way of digitising fiat currency more than an investment. The value of Tether is designed to not change over time, unlike other cryptocurrencies, so you may not benefit from an increase in price. Some cryptocurrency exchange platforms like Binance offer interest on Tether, which could be one way of earning a profit.
Compare cryptocurrency exchanges
Swyftx
Cryptocurrencies available: 245
Fiat Currencies Accepted: AUD, NZD
Trading Fee: 0.6%-0% based on a rolling 30 day's trading volume
Withdrawal Fee: $0 for AUD/ Deposit's withdrawals. Network transaction fees apply while transferring coins to an external wallet
Deposit Fees: No POLi fees. No fees on cryptocurrency and PayID deposits. Credit/Debit card deposits supported (5% fee)
An Australian owned and operated digital currency exchange that allows users to sell, trade and buy Bitcoin, and over 245+ other digital assets, with low trading fees and one of the smallest spreads available.
CoinJar
Cryptocurrencies available: 57
Fiat Currencies Accepted: AUD, GBP
Trading Fee: 0%-1%
Withdrawal Fee: No fee for AUD or GBP withdrawals. Cryptocurrency withdrawal fees are based on blockchain network fees
Deposit Fees: No fees with PayID; 2% fee with credit / debit card, Apple Pay, and Google Pay
Australia's longest-running cryptocurrency exchange with over 500,000 Australian customers and a simple to use app for both iOS and Android.
Digital Surge
Cryptocurrencies available: 245
Fiat Currencies Accepted: AUD
Trading Fee: 0.1%-0.5% based on a rolling 30 day trading volume.
Withdrawal Fee: None for Australian bank accounts - Instant withdrawals through Osko/PayID.
Deposit Fees: No fees for Osko/PayID, Direct Deposit, Bank Transfers or cryptocurrency. POLi fees range from $2-$3.30.
Because simplicity makes life better. The easiest way for Australians to buy, sell & store over 245+ cryptocurrencies. Low fees, tight spreads, Aussie-based customer support & an interface that makes crypto enjoyable & easy-to-understand. Simple. Safe. Stress-free.
CoinSpot
Cryptocurrencies available: 263
Fiat Currencies Accepted: AUD
Trading Fee: 0.1% to 1% based on order type
Withdrawal Fee: None for Australian Bank Accounts
Deposit Fees: No fees for POLi, PayID, Direct Deposit and Bank Transfers. 0.9% BPAY fee, 2.5% cash fee
Australia’s most trusted exchange since 2013.
Cointree
Cryptocurrencies available: 280+
Fiat Currencies Accepted: AUD
Trading Fee: 0.05%-0.9%
Withdrawal Fee: No fee with fiat withdrawals. Cryptocurrency withdrawal fees vary.
Deposit Fees: No fee
Buy, sell, trade and pay with crypto. Simple, low fees, easy to use and trusted by 100,000+ members. Enjoy $10 BTC credit after verification with promo code: RATE10
This information does not reflect any ranking, rating, recommendation or endorsement by RateCity of cryptocurrency or any specific provider. RateCity is providing factual information supplied by providers. Not all providers or products are shown. RateCity will earn a fee from the providers displayed in the table (if a link to the provider's website is shown), and the fee levels determine placement in the table. Cryptocurrencies are speculative, complex and can involve significant risks. RateCity is not providing a recommendation for your individual circumstances.
Product database updated 23 Dec, 2024
