Is Investing In USDT Risky?

Tuesday, 20 September 2022, 5:23 pm
Article: Hugh Grant

In the recent past, cryptocurrency has been in the news and among financial institutions. Some companies have even added bitcoin in their statements of financial position. Stablecoins or less volatile assets have also made their way onto investors’ radars. Investors have capitalized on these large stablecoins.

What is Tether

Tether (USDT) can be considered as a blockchain-based cryptocurrency pegged to the American dollar (USD). Bonds, Treasury bills, money, and other assets have been serving as collateral in financial institutions. Stable coins have a 1:1 relationship with the U.S dollar. They have less volatility compared to other cryptocurrencies such as ethereum and bitcoin. Due to its low volatility investors now prefer to buy USDT over other cryptocurrencies.

Understanding the Stablecoins

Investors in stablecoins aim to alleviate volatility and promote cryptocurrency to be a store of value. Stability in cryptocurrency will reduce the risk in this sector. Stablecoins provide liquidity in high volatile cryptocurrency markets. In these markets, it’s hard to convert forth and back between cryptocurrencies such as bitcoin and cash.

Tether, USD coin, and Gemini have been considered the most stablecoins. They’re USD-backed cryptocurrencies. The rest of the stablecoins use other types of collateral. Some of the stablecoins have been backed using fiat currencies such as the yen and euro. Some have even been backed by commodities such as silver and gold. Tether tops the list of stability. Hence, players transacting millions of dollars buy USDT in large quantities since it enhances liquidity.

The History of Tether

USDT began as a realcoin in the year 2014. The first tokens of USDT were distributed on the bitcoin network in 2015. It was among the first cryptocurrencies in the market. USDT became successful within a short time. Tether was technologically revolutionary. It had a roster of reputable investors and founders such as director Brock Pierce and the Bitcoin Foundation.

Is Tether a Worthy Investment to Cryptocurrency Investors

Converting cryptocurrencies to cash may take days and attract huge transaction costs. On the other hand, investors can swap other cryptocurrencies for tether easily and quickly. Hence, tether has enhanced liquidity in the exchange platforms. Hence, investors do not need to create no-cost exit strategies. In the long run, these stablecoins have enhanced stability and flexibility in the investors’ portfolios.

Investors moving millions of dollars first consider the liquidity of cryptocurrencies. Investors using smaller stablecoins can move an entire market. Hence, the liquidity of the tether gives investors the trading volumes they need. Besides many ups and downs tether has managed to maintain its 1:1 relationship with the dollar.

Tether can be sent everywhere on the planet. The transfer takes place quickly with relatively low fees than transfers at financial institutions and banks. Bitcoin and ethereum have high volatility. Thus, the majority of investors don’t use them for daily transactions and purchases. On the other hand, tether is less volatile, hence investors use it in their normal transactions.

For these and more reasons tether is a good investment. It’s worthwhile to consider investing in this stablecoin. Tether cannot be considered as a long-term that will grow investors’ money by itself since it stays pegged to the dollar. But investors can store tether in wallets, exchanges, and lending platforms. Storing in these platforms may attract high-interest rates. Hence, investors may end up making a good fortune. USDT has been around for more than six years and has remained stable all through. Hence, it will probably last longer.

What to Consider Before Buying Tether

USD can be found in major cryptocurrency exchanges. Traders buy them easily. Before buying USDT investors should consider its outlook and history. In the past USDT has been going through many issues. However, tether has maintained its stability all through. So far so good with tether.

Before buying USDT, investors should first understand the taxation of the cryptocurrency. Many nations subject income from cryptocurrency to taxation. The income may be earned as capital gains or interest.

Over the years tether’s competitors have been popping up. Despite stiff competition, USDT has remained the largest stablecoin. Investors have been using it widely in loans, earning interest, and trading. Some investors could view USDT as a member of the riskier cryptocurrencies due to its transparency issues. But majority consider it a major player in the cryptocurrency world.

Platforms to Buy Tether and Get high Interests

Investors can buy USDT on lending platforms or major cryptocurrency exchanges. The majority of platforms pay investors high interest just for storing USDT with them. USDT earns more interest than other stablecoins such as DAI, USDC, and GUSD. The high interest for tether comes as a result of the USDT’s high demand in trading, and cryptocurrency loans.

Before engaging in USDT trade, investors should check the annual percentage yield (APY) of the platforms. Some of the platforms and their APYs include:

Platform

Youhodler - 13.07%

Celsius - 7.10%, and 9.32% for the accredited traders

Binance - 5%

Nexo - 12%

Investors should note that some platforms are less transparent than others. Hence, some may not disclose how much of their stablecoin is backed by commodities or fiat currencies. So investors should scrutinize the platforms before choosing one.

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