Tether’s USDT token is a reason for liquidity for the cryptomarkets. Hence, the entire industry needs to stay informed on Tether’s USDT Token, because if it were to fail, it would result in everybody’s loss.
The collapse of Tether in a community that is more than its share would be awful for the cryptomarkets which would lead to a ripple effect, and the worst case could be toppling exchanges. To drive up the price of bitcoin, Tether having close ties to the crypto exchange Bitfinex has been issuing more USDT than it has dollars in the bank.
Tether has so far been a stable coin whose value is pinned to the US dollar. Tether has hovered around $1, sometimes lowered to as much as $0.80 or rose to as high as $1.10.
According to CoinMarketCap, Tether ranks among the top 20 cryptocurrencies, with a market cap of over $2 billion. A decade-old investment research firm, Weiss Ratings, is warning investors that Tether could pose a threat to the whole ecosystem, stating:
“Tether is the only ‘cryptocurrency‘ with trading volume that regularly exceeds that of its market cap. This means the entire Tether supply changes hands regularly, sometimes more than once a day. … This is important to know because it tells us that Tether is used for trading A LOT. It’s one of the primary sources of liquidity in the cryptomarkets.”
The Weiss report goes on:
“Liquidity is the lifeblood of a market. It’s what makes prices stable and seamless trading possible. The consequences could be far-reaching. What happens if Tether does turn out to be shaky? … What if this large source of liquidity suddenly evaporates?”
However, Tether has had many other problems. In November last year, it was claimed that a hacker seized nearly $31 million of the token from the company’s wallet.
Bitmex research explained why Tether has been so cagey about its finances:
“We suspect that Tether may have struggled to find appropriate banking relationships. … We believe this is likely to be the primary reason for the apparent lack of transparency, rather than a lack of USD reserves. The transparency that some Tether stakeholders seem to expect may not be possible in the financial sector when the underlying activity is not authorized or regulated by the authorities.”
Anyhow, investors should be cautious and alert about their investment in USDT or another crypto coin.