Even after five years of Tether’s introduction into the crypto market, investors are still having doubts about its claim of being backed by one American dollar. Tether is considered to be one of the most actively traded cryptocurrency. During October of the previous year, Tether broke out its trading range of $1 and went down to $0.94 for a short time. This has created much speculation around the cryptocurrency and is considered to be a hint that many investors are losing faith in the digital coin.
In order to understand the investor’s mindset and Tether’s performance in the crypto market, it is necessary to know the core backing behind Tether.
Tether, unlike any other cryptocurrency, is backed by U.S dollar for each token issued. A tether can be defined as a hybrid between fiat money and a cryptocurrency. Tether uses a USDT currency, which is said to be worth precisely what USD is worth in the same period.
Tether still holds crypto investors interest due to specific facts like no transactional fee for shifting funds between Tether wallet, the time taken for the transaction is very less and its stability in holding its value irrespective of the market situation. Many traders also use Tether as a substitute for a dollar during their online investments.
Cloud of Skepticism
Although Tether has claimed that United States dollars entirely back it, the company is yet to provide any sort of conclusive evidence about its holdings to the public.
There are also questions about Tether’s relationship with Bitfinex. Bitfinex is one of the largest cryptocurrency exchanges. Both Bitfinex and Tether has the same CEO, Jl Van Der Velde.
Some people who are regular investors of the market have purported that trading in Tether’s coins on Bitfinex exchange platform has helped support Bitcoin’s price. Bitfinex dismissed all allegations and assured that all its withdrawals were functioning as usual and it went on to say “complications continue to exist for us in the domain of fiat transactions.”
Regarding this issue, the United States Commodity Futures Trading Commission has sent subpoenas to both Tether and Bitfinex in late 2017. When asked about this, Bitfinex and Tether said “We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.”
What Future Holds For Tether?
Even amongst all these allegations, Tether has managed to stay on top of the crypto market. Tether is considered to be the second most traded cryptocurrency. There are many other stablecoin in the circulation apart from Tether, but none has come close enough to challenge its popularity. If authorities were to find evidence about any kind of wrongdoing or if its traders lose faith, the cryptocurrency could drastically decrease in value. Jehan Chu, a managing partner at advisory company Kenetic Capital and blockchain investment, commented: “Tether’s stablecoin dominance will only persist if they can settle community criticisms about their lack of transparency once and for all.”