When most people hear the term "Cryptocurrency", they often associate it with highly volatile and risky digital assets. This is true for cryptocurrency, but not for stablecoins. Tether is one example of a cryptocurrency that acts as a stablecoin. Its value has always been pegged to the US Dollar. In this article, we're going to go back to the basics and explain what is Tether USDT, and why it might be a good idea to track its volumes traded.

Tether is a company that releases stablecoins backed by the US Dollar, Gold, and the Euro. Tether is mostly known for its USDT stablecoin, which is by far the most liquid and well-established stablecoin. According to Tether, the USDT is backed by a basket of assets, made up predominantly of US Dollars. The company is often involved in controversies, mostly involving the transparency of its backing of the USDT.

Despite those controversies, Tether claims that it converts cash into digital currency. This is made to anchor its value to the price of national currencies like the US dollar, the Euro, and the offshore Chinese yuan. They also claim that every Tether token is always 100% backed by their currency reserves. This includes traditional currency and cash equivalents and may include other assets and receivables from loans made by Tether to third parties. Every Tether token is also 1-to-1 pegged to the dollar, so 1 USD? Token is always valued by Tether at 1 USD.

The CFTC recently fined Tether “for making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin”.

Tether, since its inception in 2014, has claimed that its USDT tokens are backed 1:1 by the USD and Euros. But, the company misrepresented these claims from Jun 01, 2016, to Feb 25, 2019, by changing the wording to “equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts. CFTC found that these claims weren’t true. Also, Tether wasn’t backed for most of the time.

Since USDT is pegged to the United States Dollar, this means that capital appreciation can't be achieved. You won't make any money, nor lose any by simply holding this token. On the other hand, holding USDT has a great benefit in the current volatile crypto markets.

Because USDT is pegged and its value doesn't change, this can be a great way to hedge the market's price fluctuation during tough crypto price swings. Instead of holding your cryptos through falling markets and watching your crypto portfolio decrease, swapping to USDT can help keep your gains or stop you from losing.

For example, assume you have USD 1,000 worth of Bitcoins. If Bitcoin's value is decreasing, your portfolio will definitely fall as well. Swapping to USDT will keep your portfolio's worth to USD 1,000 (of course, minus the fees of swapping).

Whenever the crypto market crashes, most crypto traders and investors tend to swap to USDT to hedge the decreasing prices. That's why stablecoins' volumes increase during such events. Those crypto traders are waiting for the crash to end, to buy back their favorite cryptos.

With Tether being the biggest stablecoin by market cap, its traded volume is a good indicator for crypto market trends. When the crypto market is crashing, its volume traded increases and the market cap as well. On the other hand, when the crypto markets are up, its market cap decreases, and volumes become lower.

Most crypto exchanges offer Tether USDT as a cryptocurrency. We at CryptoTicker recommend the following exchanges, as they proved to be solid companies:

• Binance
• Kraken
• Coinbase
• Gate.io
• KuCoin

Tether and Bitfinex - the issuers of the highly popular cryptocurrency USDT stablecoin have agreed to pay $42.5M in fines to the Commodity Futures Trading Commission (CFTC) for false claims that the Tether Stablecoin was fully backed by US Dollars and over execution of illegal transactions while operating Bitfinex cryptocurrency trading platform, a CFTC press release on Oct 15 said. The stablecoin Tether - the largest by numbers issued and usage has long been criticized for the claim that it's USDT is backed 1:1 by the United States Dollars (USD).

The Commodity Futures Trading Commission (CFTC) is an American agency responsible for regulating U.S. derivatives markets including futures, swaps and certain options. This is the first that the CFTC has applied the definition of commodities to include stablecoins. However, the Commissioner reiterated that the agency doesn't regulate stablecoins and public shouldn't have any false sense of comfort that CFTC is overseeing the stablecoin business.

The settlement with the Tether respondents finds that there were misrepresentations regarding the assets backing tether, specifically that the USDt tokens were backed 1-to-1 by US dollars.  The evidence establishes that this assurance provided to tether customers was not 100% true, 100% of the time.  When reviewing this record, it is clear to me that wrongdoing occurred, and that someone should be held accountable.  For all of these reasons, I concur in the Commission’s acceptance of the Tether respondents’ offers of settlement.

Commissioner Dawn D. Stump Over CFTC Decision

CFTC has fined Tether for "for making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin" and Bitfinex for finding that it "engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S persons on the Bitfinex trading platform and operated as a futures commission merchant (FCM) without registering as required".

Tether, since it's inception in 2014, has claimed that it's USDT tokens are backed 1:1 by the USD and Euros. But, the company misrepresented these claims from Jun 01, 2016 to Feb 25, 2019 by changing the wording to "equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts. CFTC found that these claims weren't true and Tether wasn't "fully backed" for most of the time.

The agency also noted in it's verdict that Tether failed to disclose that its reserves included unsecured receivable and non-fiat assets and that the blockchain company failed to carry out routine professional audits of its reserves backing. CFTC press release mentions that Tether held FIAT reserves for only 27.6% of the days in a 26 month sample time from 2016-2018 and the company relied on unregulated entities and shady third parties to hold funds, instead of holding them itself.

Tether hasn't concluded any proper audit of its reserves until now and the last audit was found to be manipulated by the CFTC as the company selected the date in advance and transferred funds beforehand to paint a false picture of 1:1 backing. While the matter is closed for now with the CFTC, Tether's reputation as a credible and reliable stablecoin issuer has come under fire. The red flags that were previously raised by the critics have basically been confirmed.