Hello everyone. Today we will talk about Tether (USDT). There are many different opinions about this stablecoin on the internet, so I decided to make a summary of all the drawbacks and complaints about the Tether as well as highlight the positive aspects, if there are any.
First of all, let’s briefly understand what is this the coin, when it appeared and for what.
Tether was created in July 2014 and was originally called «RealCoin». The bitcoin engine as a basis was took for creating this, but after 3 months there was a rebranding, after which the project received a new name –«Tether» and the essence of the coin was completely changed. Now the coin, allegedly confirmed by the dollar in the ratio of 1 to 1. The first exchange that which listed USDT was «Bitfinex», but after 2 months, coin was trading on «Poloniex». Bitfinex not the first to pay attention to Tether and added a coin to its platform. The exchange and the company «Tether Limited» have one leadership and this information was carefully hidden. But at the end of 2017, Bitfinex officially confirmed this information and only after the evidence of the connection of these companies appeared on the network.
What is the purpose of the coin? First of all, it is a handy tool for going to Fiat in circumvention of the law. Since, due to regulatory restrictions, it is difficult for exchanges to place a real dollar paired with cryptocurrencies, it was planned to circumvent these inconveniences with a digital coin, which has a stable exchange rate. Although initially the project management stated that if you will contact Tether to exchange your dollars for USDT, no one is obligated to reverse the exchange of USDT for real dollars.
So, we figured this out, but let’s now define pros and cons of USDT.
I found only two significant advantages:
– Stable course. Yes, there were moments when the coin collapsed to $ 0.9 or rose to $ 1.21, but as a rule, it recovers quickly, so most often the exchange rate is very close to one dollar.
– Prevalence. The coin has a high popularity and it is traded on almost all exchanges. This is very convenient, because almost everywhere it is possible to buy or sell it.
Well, we figured out advantages of it, but now we will discuss the main complaints and disadvantages.
– Possible market manipulations. Tether and Bitfinex`s management have been blamed for market manipulations for quite some time. There is information in one research that at least in half of the cases of significant rise or fall, Tether was implicated somehow and influence on the course from 10% to 70%. Also, in many studies there is information that the cause of the tremendous growth of Bitcoin at the end of 2017 was Tether along with the Bitfinex exchange. Please, pay attention to the picture below, where on the Bitcoin chart was superimposed the release of Tether tokens. Than thicker the vertical line, the more coins were created.
The graph shows that tokens were mainly released at that moment of a sharp rise or fall of Bitcoin. Also, you can find below strong message how, with the beginning of the growth of Bitcoin, the release of USDT began at a tremendous pace. At the time when the first cryptocurrency started to grow, Tether was issued for~ $ 450 million, but at the end of the rapid growth on the market, it was already had about $ 2.2 billion.
We cannot claim 100% that manipulations have taken place, there are just reasoning and the provision of facts.
– Hiding important information. For unknown reasons, Tether concealed its direct connection with the Bitfinex exchange and reported this fact only after the release of direct evidence. This is very important information, because it shows a low level of frankness of the company.
– Lack of normal and regular audit. Until the beginning of November, this was the main problem of a Tether. No one has ever seen company accounts that held dollars to secure USDT. However, on November 1, the Tether management provided to the public information about cooperation with Deltec Bank & Trust Limited («Deltec»), which conducted a verification of accounts and provided such information:
«At the end of the business day on October 31, 2018, there is on Tether Limited’s account $ 1,831,322,828. These data are based only on the information we own».
Although this information confirms the fact that at the time of the sent message on October 31, Tether had the resources to ensure USDT in the 1to 1 ratio, but there is still an open question about securing throughout the company.
Tether Limited states that the financial institution will conduct an audit on an ongoing basis, however, the company previously had an auditor who, for some reason, decided to refuse it at the beginning of the year. How can investors be sure that now the company’s management is honest? At the moment, they only have information that on October 31, there really was a 1to1 USDT provision, but if further tokens are created and the new auditor again refuses to cooperate, then the old risks will become relevant again.
Everyone has to decide for himself whether he is ready for such risks, whether he trusts Tether, which currently doesn`t provide direct evidence of its honesty. However, it is possible to use USDT as a «bridge» for purchasing various cryptocurrencies, since it is convenient. However, I would not use a coin to save my capital.