In the world of cryptocurrencies, Bitcoin is still the King. It is the most well known, most widely accepted, and most talked-about of all digital assets. In fact, there is Bitcoin, and then there are altcoins. But one of these other cryptocurrencies is probably a much bigger star than you imagine.
Tether [USDT], one of the first and most widely known stablecoins, is a special altcoin that actively seeks to disassociate itself with the volatility that made Bitcoin, and other tokens, so famous. It is a coin that has decided to tie its value to the price of the U.S. Dollar and show what possibilities there can be in true digital currency.
Without the fear of massive price swings, there is no incentive to hold onto USDT, and there is no need to trade it later on for a better price, the price of Tether stays the same. But, this means that the cryptocurrency has become a powerful tool in the digital space as it highlights a ‘peer-to-peer electronic cash system’, which is what Bitcoin was made to be.
More so, Tether is sparking its own revolution in and amongst the crypto and blockchain space as there are already pilots and plans for Central Bank Digital Currencies [CBDC] in the works across the globe, and even traders are seeing the advantage of Tether.
USDT is useful for traders as it is not only listed on most exchanges, it also is the most highly traded coin — beating even Bitcoin. The stablecoin’s recent 24-hour trading was some fifteen billion more than that of Bitcoin. But more than that, USDT is being used as an asset for margin trading in some arenas offering traders the ability to reduce their risk, particularly in times of high volatility.
The Rising Star
Tether, although with its controversies, has been a rising star for some time now. However, it has really taken off in 2020. Currently, there is more than $9 billion USDT in circulation, however, more than half of that — $5 billion, was printed since January.
The demand has always been high as users of cryptocurrency like to take advantage of USDT because of its stable value and broad acceptance, and this is why its trading volume for one day is $45 billion compared to Bitcoin’s $30 billion.
Part of the reason for the recent spike in Tether printing has to do with the market collapse that was witnessed in March. This fall, which was tied to the COVID-19 pandemic and its impact on traditional markets, caused quite a bit of panic as Bitcoin lost half its value.
There was a desire for exchanges to have liquidity and cash in their accounts, and thus the demand for Stablecoins, like Tether, skyrocketed.
“On 12 and 13 of March, when there was that huge drop—50 percent in Bitcoin and other major currencies—we have seen people being stuck on fiat on-ramp exchanges because they couldn’t move fast enough their dollars in order to exploit the market conditions or protect themselves,” Tether and Bitfinex CTO Paolo Ardoino explained.
This stablecoin also has a number of other advantages that are not always immediately apparent in the crypto space, but are boosted in the fiat space as a digital dollar. The USDT currency is easily available and can be used as a hedge against currency inflation and allow people around the world to get their hands on dollars if their own currencies are losing value to inflation.
Tether has become a usable cryptocurrency for more than just accumulating gain from ‘hodling’ like Bitcoin is. The coin ticks all the boxes for it to be a true digital currency, but it can also offer liquidity and essentially work like new money being printed in a way that the U.S. Fed is doing now to stimulate the ecosystem.
But, more than that, Tether is starting to be used elsewhere in the cryptocurrency space. Cryptocurrency exchanges such as ByBit and Overbit have also identified this potential to help with risk aversion in trading. These exchanges have added the stablecoin to its deposits to give users the ability to reduce their risk, particularly in times of high volatility, and hold their assets in Tether.
Crypto exchange Overbit especially pushes this idea and gives customers a $50,000 demo account to get to grips with and try before diving into the real thing. Trading with cryptocurrencies, and stablecoins does take a bit of practise, so this makes it quite viable.
An Exchange Medium
Tether is more established as a usable digital currency and less as an asset for trading, but it clearly has its uses there, especially in a world where cryptocurrency is becoming a more popular asset to trade.
Because accompaniment like Overbit allows for its users to deposit USDT, there is also a growing interest from Forex traders to use USDT as the underlying asset in their margin trades. Overbit has again identified this surge in demand and to meet it has included 17 more trading pairs. This of course, makes sense as Forex users understand the market of foreign currency, but to have a ‘digital dollar’ at hand to use in margin trades makes the process far more smooth and seamless.
In a recent survey, it was found that 41% of respondents are both crypto and Forex traders. There appears to be a greater proportion of novice crypto traders that are both Forex and crypto traders. Among the novice traders in the survey, 63% stated that they had traded in both Forex and crypto.
Traders can thus easily leverage their trades on Forex margin calls using USDT as the dollar, seeing as it is essentially the dollar, but easier to move being a cryptocurrency. Thus, Forex trading is quicker and simpler, and allows for more efficient margin trades to be made than if just using deposited dollars, or even Bitcoin.