Pros and Cons of Using Tether (USDT) in Crypto Trading: Market Capitalization and Comparison

Salomon Kisters

Feb 27, 2023

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Stablecoins are a great refuge from the ruthless volatility that the crypto market experiences. If you are a crypto enthusiast, at one point or another, you might have converted your crypto assets to a stablecoin to shield yourself from the long bearish trends.

Tether (USDT) is a well-known stablecoin that investors widely use in the crypto space. Crypto users also often replace their cryptocurrencies with this stablecoin for safekeeping or cashing out.

This article thoroughly covers everything you need to know about Tether, its market capitalization, and the pros and cons of this stablecoin.

What is a Stablecoin?

Before we dive into the details of Tether, let us first have a quick look at what a stablecoin is. A stablecoin can be best defined as an asset whose price is ‘stable’. The cost of these assets is linked directly to other real-world assets that do not show significant swings in their prices.

Examples of these real-world assets include the US dollar, EURO, and Pound.

A Quick Overview of Tether

What happens when an individual wishes to convert one cryptocurrency into another? Or when a person wishes to sell their crypto holdings to purchase fiat currency? Tether is a stablecoin that allows seamless crypto-to-crypto and crypto-to-fiat conversion.

For example, if a person wishes to replace their Bitcoin with a particular altcoin, they will first receive Tether after the sale of Bitcoin, which they may then use to purchase the desired altcoin. Investors in the crypto sector use stablecoins like Tether to pour their money into virtual currencies.

Today, Tether is the most widely utilized stablecoin with the highest market capitalization. The monetary value of the coin is pegged to the US Dollar. This means that the stablecoin will maintain a price equal to the US dollar’s value and is generally unresponsive to the sudden market fluctuations we have come to associate with cryptocurrency.

The Pros of Using Tether

Have you ever wondered why so many investors have taken so much interest in Tether? This is primarily due to the numerous advantages that the coin has to offer. Here are some of these listed below:

• Tether offers more liquidity than any other digital asset. Being pegged to the US dollar means it is quite stable in value, which is why it is so commonly used for trading.
• Almost every other cryptocurrency experiences great price fluctuations. Conversely, Tether shows low volatility, making it an ideal choice for investors who wish to have a stable and secure portfolio.
• Tether believes that success can only be achieved if the firm and investors’ relationship is based on trust and honesty. To achieve this end, the firm ensures transparency at all levels. The firm undergoes regular audits, and the details of each transaction can be viewed on the blockchain.
• Firms tend to impose unreasonably high fees on transactions of digital assets. This causes investors and traders to lose interest in that particular asset. Therefore, Tether abstains from burdening its users with hefty transaction charges. Traders looking for assets that have low trading fees can opt for Tether.
• Tether is recognized by and listed on countless exchanges. The wide acceptance of this stablecoin is beneficial for investors as they have a higher probability of securing profitable trades.
• Tether offers growing investment opportunitiesdue to its stability and high liquidity, making it an appealing option for investors seeking to diversify in the volatile crypto market.

The Cons of Using Tether (USD)

We will now go over the disadvantages of using Tether. Here are some reasons why Tether may not be considered a good investment:

• Although the firm claims to have pegged each Tether coin with a US dollar, only 2.9% of the total US dollar supply is in cash. In times of turmoil, if all the investors decide to withdraw their money, the firm will have no US dollars left to offer its investors in exchange for Tether.
• The state of New York takes crypto legislation very seriously. The Attorney General of New York, Letitia James, has previously fined iFinex (parent company of Tether) for not abiding by the rules and regulations. The fine mounted up to $18.5 million. The New York attorney general suspects Tether of embarking on the same tract as its parent firm.
• Tether contributes 53% of the total stablecoin market capital. The death of Tether (USDT) could result in the downfall of the entire crypto industry.

Current Market Capitalization and Tokenomics

Tether has a current market capitalization of $70.42 billion. It is a technical standard compatible token on the Tron and Ethereum Blockchain. Check the difference between TRC20 and ERC20 tokens to learn more.

In a nutshell, TRC 20 tokens are technical standards utilized for smart contracts on the TRON blockchain while ERC 20 are standard smart-smart-contract activated tokens on the Ethereum blockchain.

Another frequently asked question we come across is about the difference between BEP 2 and BEP 20 tokens. BEP 2 tokens are used for the governance of the Ethereum blockchain while BEP 20 tokens are disbursed as rewards in applications built upon the Ethereum blockchain. For more information on the differences between the BEP2 and BEP20 token, you can check this link: https://home.core.allbridge.io/compare-standard/swap-bep2-vs-bep20.

There is no upper cap to the amount of Tether tokens in circulation. As of October 2022, the total Tether tokens in circulation were approximately 65.84 billion.

Conclusion

Tether is a renowned asset-backed stablecoin with numerous advantages and disadvantages. It is highly suitable for investors who want a nonvolatile portfolio. At the same time, Tether is under close watch by the New York Attorney General, making it a shady investment.

The advantages and disadvantages of Tether tend to cancel out each other, making it an entirely neutral investment optio

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Please note that the Content may have been generated with the Help of AI. The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.