Tether USDT, the world’s most popular stablecoin, is predicted to rise in the coming months. This prediction is based on three reasons: Tether’s significant exposure to market volatility, the increasing number of competing stablecoins and Tether’s lack of transparency.
For those unfamiliar with what a stablecoin is, they are cryptocurrencies that allow traders to “park their assets without worrying about recouping losses.” This is because they tend not to fluctuate in value as much as others making them more predictable in their worth.
Stablecoins are so attractive to investors that these have risen in value within the last few years, with large sums of venture capital being invested into these projects. Tether USDT is the most popular crypto stablecoin in the global market, with a daily transaction volume over $1 billion.
In recent months, rival stablecoins have begun to surpass Tether in its market share. Gemini Dollar (GUSD) and Paxos Standard (PAX) both began to market themselves as more stable than USDT by providing steady reserves at specified intervals. These two coins together claim to be more stable than Tether USDT by more than 1:1 despite having very small volumes compared to it.
Tether regulatory challenges
Tether dollars or simply USDT, have been under regulatory scrutiny lately – with some critics claiming that the company behind the stablecoin is insolvent. Therefore, the stablecoin’s development team chose to hire a law firm to help them audit its funds. However, so far no public results have been released.
The company has also failed to provide real-time audits of daily transactions and reserves that cryptos usually provide every now and then. This has raised concerns among investors who suspect that Tether is insolvent and has been engaging in fraud to support its value against fiat currencies.
Other stablecoins also provide a more transparent system that allows investors to view their transactions and holdings.
Does Tether USDT still have a chance?
Despite the competition, Tether USDT is still the most popular stablecoin in the market. This is because there are already many exchanges that support it and a number of exchanges that offer fiat-to-stablecoin trading pairs, such as Bittrex and Poloniex. Thus, USDT remains a favorite choice for traders looking to buy digital currencies without worrying about market volatility.
Tether is also the preferred choice of institutional investors looking to diversify their portfolio with cryptocurrencies. In addition, the stablecoin’s merchant adoption is also on the rise. For example, Bitfinex added USDT as a deposit option for margin trading in February 2018.
In fact, Tether has been constantly adding more platforms from different countries and in different regions of the world which further proves its popularity and its potential value growth against fiat currency.
Stablecoin competition rising
On the other hand, if Tether does not succeed in addressing its transparency concerns in the coming months, then more stablecoins that offer greater transparency will further drive down its exchange rate. This means that investors will eventually move their capital to other crypto-stable coins with more trustworthy systems and regulatory compliance.
Currently, Crypto.com Chain is one such coin that is ahead of Tether USDT in terms of daily trading volume and market cap. This Singapore-based crypto was launched on March 6 this year in partnership with Monaco. MCO has a USD pegged token called MCO and a Euro pegged token called MCOE.
What is a stablecoin?
A stablecoin is a cryptocurrency that allows investors to “park their assets without worrying about recouping losses.” This is because they tend not to fluctuate in value as much as others making them more predictable in their worth.
What are the benefits of trading with a stablecoin?
Stablecoins offer several benefits over other cryptocurrencies such as bitcoin and Ethereum. Firstly, stablecoins do not have the same volatility as other cryptocurrencies. This means that you can use them to hedge against market fluctuations and protect your crypto portfolio from any sudden losses. Secondly, stablecoins allow for greater investor flexibility due to its stability. For example, a trader can just hold a stablecoin on their exchange and not need to constantly monitor the value of their cryptocurrency portfolio. Thirdly, stablecoins offer better protection for your cryptocurrency portfolio from hacks and other security risks.
How does a stablecoin secure its value?
Stablecoins are pegged to a fiat currency, meaning that their price is always tied to that of the fiat currency. In this way, investors can be assured that the stablecoin has not been manipulated in any way. They are also protected from possible hacks or attempts at theft because they are held in real-world bank accounts and regulated reserves with oversight and transparency by banks.
