Over the past few years, a crypto has risen to the top of the industry’s leaderboards that may be mysterious to many investors. Now the fourth-largest cryptocurrency by market capitalization, this asset is Tether, which trades with the ticker symbol USDT.
USDT is a stablecoin, an asset that is backed by a store of value outside of the cryptocurrency markets, such as fiat monies (namely the U.S. dollar) or commodities like an ounce of gold. Such an asset has been deemed important by traders, especially considering the high levels of volatility that are often affiliated with the Bitcoin market.
What is Tether?
USDT is the flagship stablecoin of Tether. According to the company, these crypto assets are “100% backed by reserves,” which “include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.” The intricacies of the reserves are published daily, ensuring that users of the asset can trust the cryptocurrency.
As USDT is 100% backed by and redeemable for a reserve of assets at all times, the market values it near $1.00, no matter what crypto exchange you trade on. There were some problems with Tether’s reserves, though these issues have since been resolved, the company says.
There are slight deviations to the value of the cryptocurrency, though these are often quickly reverted as investors normalize the price of USDT through arbitrage.
Simply put, Tether is a digital representation of a dollar that can leverage the characteristics of blockchain transactions: speed, anonymity, borderless, decentralized, global, and uncensorable.
How Traders Can Use USDT
Along with its use as a medium of payment for crypto investors and companies, Tether is popular as a tool for traders.
Due to the fact that the cryptocurrency has effectively zero volatility, USDT is often used as a way to profit by those traders expecting a downturn in the value of Bitcoin or other cryptocurrencies. For example:
- At a market price of $10,000, one BTC can be sold for approximately 10,000 USDT.
- That same 10,000 USDT could buy two BTC if the cryptocurrency fell to $5,000.
- Once (if) Bitcoin returns to $10,000, one making such transactions would have profited $10,000.
Also, it can act as a hedge; traders that don’t want to hold crypto assets overnight or when they aren’t trading can sell their assets for USDT. Furthermore, as it is accepted by most exchanges, USDT is also a good way to transfer value between exchanges, allowing one to not fear their deposit will lose value once it arrives in the wallet of another exchange.
SimpleFX Adds Tether Support
With support for USDT, users of the platform can position themselves accordingly, moving in and out of the stablecoin as they please, to benefit from swings in the value of Bitcoin and other cryptocurrencies, of which SimpleFX supports many.
Aside from cryptocurrencies, SimpleFX also supports other asset classes like commodities, foreign exchange, stocks, and stock indices, including the Dow Jones and even indices such as the Euro Stoxx and Nikkei.
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