Tether (USDT) is a stablecoin that mirrors the price of the U.S. dollar and is issued by a Hong Kong based company. The peg to USD for this token is achieved by maintaining a sum of dollars in reserves equal to the number of USDT in circulation.
Tether’s market cap has surged in the last few weeks, potentially having a positive effect on the recent Bitcoin rally, that has driven prices to a near all-time high.
Paolo Ardonio, CTO to both Tether and Bitfinex tweeted on Thursday that in just nine days, the supply of Tether had increased by 1 billion, marking the second-fastest expansion in the history of the token. The record was made on Sept. 4, 2020 when Tether’s circulating supply increased by 1 billion in just over eight days.
(updated) Tether #USDt growth
20/02/19: 4 billion
11/03/20: 5 billion (20 days)
26/03/20: 6 billion (15 days)
18/04/20: 7 billion (23 days)
6/05/20: 8 billion (18 days)
25/05/20: 9 billion (19 days)
21/07/20 : 10 billion (27 days)
1/08/20: 11 billion ( 11 days)
— Paolo Ardoino (@paoloardoino) November 26, 2020
Tether currently has a market cap of 19 billion, which means that there are 19 billion USDT in circulation at a price of $1.00. Data from CoinMarketCap indicates that Tether’s market capitalization has increased by close to four times since the beginning of 2020. At its current circulating supply, Tether records the fourth-highest market capitalization of any cryptocurrency in the market.
Tether and other stablecoins provide fiat onramps to cryptocurrency markets. Holders of these assets therefore have minimized price volatility and enjoy easy redeemability once the digital assets are sold. Although USDT is backed by the U.S. dollar reserves, the company has never produced a full audit of its bank accounts.
A report by Boomerang claimed that Tether is backed by cash and short term securities equal to 74% of the outstanding coins, and not completely pegged to the U.S. dollar, as commonly advertised.
Bitfinex is one of the biggest cryptocurrency exchanges in the world, and is owned and run by the same management group as Tether. Allegations arose in 2019 that Bitfinex was using Tether’s cash reserves to cover a rumored $850 million funding gap, with the reserves meant for backing Tether. The allegation also claimed that the two companies manipulated Tether’s 2017 bull marking though it was never proved due to the decentralized nature of the decentralized cryptocurrency market.
Although there are a lot of inconsistencies with Tether, it is still the dominant stablecoin in the industry and accounts to more than three-quarters of the stablecoin market cap. This might be largely because it is the first stablecoin to launch in the market hence the most popular.
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