Encryptoza

Sign Up
Log In
Sign Up
Log In

Pros and Cons of using USDT

Bitcoin / By
Tether

Tether is the third largest cryptocurrency in the world with a market cap of around $78 billion US Dollars (Let’s not even count how much that is in South African Rands). This stable coin is being well accepted in the Crypto community as it offers a layer of protection to crypto investors from the volatile cryptocurrency markets. There’s been a lot of hype and popularity around tether, however its popularity doesn’t necessarily make it a 100% safe investment. Tether has a few economists worried, including officials at the United States Federal Reserve ofcourse, as well as the US Securities and Exchange Commission Gary Gensler who is becoming more adamant on regulating the cryptocurrency industry, specifically stable coins.

What is USDT?

Chances are you’ve heard a thing or two about Bitcoin, right? But what about tether? Or the acronym USDT?

Like bitcoin, tether is a cryptocurrency. In fact, it’s the world’s third-biggest digital coin by market value as we’ve mentioned earlier. But it’s very different from bitcoin and other cryptocurrencies.

Tether a.k.a USDT is a Stablecoin. What is a stable coin you may ask?

These are digital currencies that are tied to real-world assets — the U.S. dollar, for example — to maintain a stable value, unlike most cryptocurrencies which are known to be volatile. Bitcoin, for example, rose to an all-time high of nearly $65,000 in April and has since almost halved in value.

If you want to learn more about stable coins, we have an entire section on the different types of coins on the Encryptoza platform

Tether was designed to be pegged to the dollar. While other cryptocurrencies often fluctuate in value, tether’s price is usually equivalent to $1. This isn’t always the case though, and wobbles in the value of tether have spooked some investors in the past.

Crypto traders and investors often use tether to buy cryptocurrencies, as an alternative to the actual FIAT US Dollar. This essentially provides a way to seek safety in a more stable asset during times of sharp volatility in the crypto market.

5 Pros of using USDT

  1. Its price is stable – In the case of USDT, its value is pegged 1 USDT equal to 1 $ US Dollar 1=1.
  2. Transactions are cheap – For example, if you send money from one USDT account to another, no fees are charged for that transaction. But if you want to convert USDT for other cryptocurrencies or fiat currencies, you incur a small transaction fee.
  3. It is a highly integrable currency – USDT is especially easy to integrate into exchange platforms. As a result, virtually all exchange platforms offer pairs to trade.
  4. It greatly facilitates the task of protecting the funds of traders and traders interested in working with cryptocurrencies – Since it allows to quickly exchange more volatile cryptocurrencies like Bitcoin in a stable cryptocurrency.
  5. Remittances – Just like Bitcoin You can send Tether to any corner of the planet without conflicts and low commissions.

5 Cons of using USDT

  1. There are doubts about whether the Tether company maintains a 1: 1 collateralization between the USDT tokens and their bank reserves – This is because it has never been possible to carry out a complete and public audit of this system. Due to this in 2017, USDT faced a difficult situation in which its value had well below the 1: 1. Likewise, the Tether company has been involved in several scandals such as the Bitfinex hacking scandal and even the one suffered by Tether itself, both with millions of losses. On August 9th 2021 however ,Tether put out an attestation about its reserves, a way of reassuring users that the most popular Stablecoin is, well.. “stable”.
  2. It has been used many times to perform fairly “gray” operations in crypto markets – These operations include price manipulation of other cryptocurrencies and even criminal acts. While these types of stocks are not unique to USDT, the impact of this cryptocurrency more than multiplies such stocks. It has even been pointed out to be a scam and a money laundering scheme, by not making clear where its huge market capitalization has come from in such a short time by the time it exceeded 4 billion dollars.
  3. Tether is a company with many contradictions – First, it offers USDT as a 1:1 backed cryptocurrency with the dollar, that appears on the main page of its website. However, in the legal and risk terms, it shows that they do not guarantee this claim 100%.
  4. It is not an anonymous currency. The fact that you need to have an account to make a bank deposit for the tokens to be made available, removes privacy, and puts your data in the hands of a company.
  5. It is a cryptocurrency controlled by Tether; therefore, it is not decentralized, and its functions depend on this company and it’s success of failure.

Conclusion

Having a Stablecoin like Tether in a crypto market characterized by high volatility is an essential factor. Above all, if you want to take advantage of the maximum returns that this type of negotiation can offer you. There are many other stable coins out there that you can rely on besides USDT, so try to always have an open mind when deciding what the best stable coin for you is.

At Encryptoza, we offer you a simple yet high quality learning platform so that you can have all the tools necessary to be a smart cryptocurrency investor or trader.

Our courses are available for beginners, intermediate as well as advance Crypto investors. With our Premium Cryptocurrency Course, you can learn everything you need to become an expert in the crypto world! Sign up today and get a 25% discount. Contact us to find out how you can obtain a discounted coupon code.