What Lies Ahead for the Stablecoin
Stablecoins are considered a safer bet for crypto investors, especially during times of enormous market volatility. Tether has a long reputation as the leading stablecoin pegged to USD and has become one of the most traded cryptocurrencies in the world.
The tether price prediction is tied to its controversial history. During the first two years, Tether’s market cap increased by 14 times. From 2017 to 2019, the project’s worth increased by an incredible 145 times. However, in the next few years, Tether’s capitalization increased by only nine times.
It indicates that the coin’s growth is not at the same level as before. Does that mean now is the right time to convert USDT to EUR and get rid of your Tether coins? First, read our detailed analysis of what can be expected from the Tether price prediction this year and beyond. The information will give you some understanding of the coin’s nature, its current situation, and prospects for the future.
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Tether’s Evolution: From Controversy to Prominence
Tether’s history goes back to 2014 when a company named Tether Limited Inc. launched the token on the Bitcoin blockchain.
In 2015, Bitfinex listed Tether on its crypto exchange platform. The company developed Liquid and Omni protocols, which enabled USDT's presence on multiple blockchains. The token soon became available on Ethereum, Tron, EOS, and Algorand.
Tether attracted loads of attention, and in 2019, it even had a higher daily and monthly trading volume than Bitcoin. Another interesting discovery was that Tether was a part of 50% of all BTC trades in July 2021. That’s an interesting consideration for the future of Bitcoin since the two seem more closely connected than they appear to be.
USDT aims to maintain the $1 value since it is pegged to the US dollar. However, that was not always the case. In 2018, its worth reached $1.32, which was an all-time high. Tether had some issues in 2015 when its worth was only $0.57. The coin reached better stability in recent years, with fluctuations not going over $0.02 from the desired $1 value.
USDT’s Future: 3 Factors to Consider
Many argue that increased accountability and transparency are needed for Tether to move forward successfully. Here are some major factors to consider for USDT’s future. Take a look and decide for yourself whether it is a smart move to invest in this coin.
1. Bitfinex-Tether Controversy
According to the Paradise Papers leak, the same group is behind the Tether stablecoin and the Bitfinex crypto exchange. And that doesn’t come as a surprise because Bitfinex was among Tether’s first partnership companies, with their agreement reached in 2014.
The controversial relationship has been in the public focus for several more reasons, including the following:
- Some speculations exist that the company pumped Bitcoin price by using Tether on Bitfinex to purchase BTC. It ensures that the token’s price goes up when it suits the company.
- In 2019, the State of New York detected a cover-up of $850 million. Tether settled with the government before a lawsuit, paying an $18 million fine. Many believe this confirmed that it didn’t have stable reserves for the stablecoin at the time.
- Tether published a confirmation of its reserves in November 2018, verifying the full backing of its funds. However, experts discovered transfers between Tether and Bitfinex the following days, indicating the company is moving funds as necessary.
Tether has faced plenty of criticism and controversy regarding its connection to Bitfinex. Despite these controversies, Tether remains one of the most widely used stablecoins in the cryptocurrency market.
2. Tether’s Reserve Backing
If you check the official Tether website, you find a claim that each coin is pegged with a matching fiat currency. In the case of USDT, that would be the US dollar, and the company insists that the ratio is 1-to-1. USDT coins are present on various networks, including Tron, Ethereum, Solana, Avalanche, and many more.
The latest quarterly report mentions that Tether’s total assets have been $97.02 billion in 2023. From that sum, about $82 billion is in cash and cash equivalents. Here’s a quick breakdown:
- U.S. Treasury Bills — $63 billion
- Overnight reverse repurchase agreements — $9.3 billion
- Money market funds — $8.33 billion
- Term reverse repurchase agreements — $815 million
- Cash and bank deposits — $394 million
- Non-U.S. Treasury Bills — $69.25 million
The rest is in Bitcoins, precious metals, corporate bonds, secured loans, and other investments.
The talk around Tether's reserve backing shows how important it is for cryptocurrency to be clear and transparent. People who use it want to know that their digital money is safe and has real support behind it. How Tether deals with these worries and keeps trust from its users will be important for its future.
3. Possible Collapse
Tether has handled all past controversies well. The company managed to navigate through rough patches and remain the leading stablecoin in the crypto market. If you look at Tether’s market cap, only Bitcoin and Ethereum have a larger capitalization: 100 billion against 1.5 trillion and 400 billion respectively.
Transparency issues and legal problems, especially the settlement where Tether preferred to pay $18 million to the New York State than risk a lawsuit, have caused some talk about the coin’s potential collapse. The scenario happened with Terra, and the crypto markets lost about $500 billion.
An encouraging difference is that Terra was an algorithmic stablecoin. And although it’s not as transparent as we’d like, Tether relies on reserve assets for its value. A possible collapse could happen if anyone discovers that the reserves are far off from what the company claims. It’s a scenario that has a small chance of occurring, and experts believe Tether is here to stay.
Tether’s Main Rivals
If you don’t like the controversies surrounding Tether, you might look for a replacement. The main market competitors are the following:
- Competing stablecoins. USDC is the second in the stablecoin market in terms of capitalization. Some other options are Pax Dollar (USDP), TrueUSD (TUSD), and Binance USD (BUSD).
- Alternative fiat-backed tokens. You can also pick a stablecoin pegged to another currency. Tether is the company behind EUR, CNHT, XAUT, and MXNT. Some other options include EURS, EURC, and BGBP.
- Decentralized stablecoins. These use algorithms and maintain their peg to the fiat currency by using special protocols. DAI is a popular choice, and many investors also choose FRAX, USDD, and SUSD.
These stablecoins are competing with Tether for users who want to trade cryptocurrencies but also want stability in their value. Even though Tether is still very popular, these rivals are giving it some tough competition.
Tether Price Prediction Conclusion
The only certain thing is that Tether has a rich history. It started strong, and although its growth isn’t at the same rate as before, it’s still the leading stablecoin. Tether navigated many controversies successfully, and it’s still more popular than the competition.
It can be a safe haven for a short while if you want to avoid potential crypto market volatility. In the long run, it’s hard to say what could happen to the Tether price prediction. Most experts believe it will be around for many years, but if a surprising controversy is uncovered, it could lead to new problems and a potential collapse.
Kristin McCasey is a partner and editor atPlay Louder!She is a former award-winning film editor turned work-at-home-mom blogger. Three years after their son was born, she and her husband left their Los Angeles careers to have more time as a family. She now works with her husband, Joe, on their finance blog, teaching others how to achieve financial independence.