Tether (USDT) is the largest stablecoin by market capitalization. Cryptocurrency traders use stablecoins like Tether to make transfers between different cryptocurrencies or to move their investments into or out of fiat currencies. The key feature of USDT is that its value is pegged to the US dollar. In theory, this means that Tether should not be affected by volatility that can dramatically impact the values ​​of other cryptocurrencies, such as Bitcoin (BTC).

What is a Stablecoin?

Stablecoins, like Tether, provide a low-volatility digital asset that generally maintains a stable valuation. The value of a stablecoin is pegged to a stable asset such as gold, the US dollar or another fiat currency, meaning that the currency attempts to maintain the same value as its reference. “The idea is that 1 Tether can always be exchanged for 1 dollar, regardless of market conditions,” explains Steve Bumbera, co-founder and lead developer of Many Worlds Token.

Currently, Tether is the largest stablecoin, accounting for approximately 53% of the total stablecoin market capitalization. USD Coin (USDC) is the second largest stablecoin by market cap, with around 31% of the market, followed by Binance USD (BUSD).

Cryptocurrency traders use Tether to provide consistent and reliable liquidity when entering and exiting cryptocurrency trades without facing unpredictable losses due to volatile price changes. In addition to USDT, Tether issues other stablecoins backed by different assets, including:

Tether Gold (AUXT): Anchored to the price of gold.

Tether Euro (EURT): Pegged to the euro.

Tether GBP (GBPT): Pegged to the UK pound sterling.

Tether Yuan (CNHT): Pegged to the Chinese yuan.

How does Tether work?

Tether's stability comes from its currency reserves, as the company claims to hold dollars and other assets that are equal to or greater than the total number of USDT in circulation. In other words, for every Tether token in circulation, the company claims to have one dollar in its reserves, either in cash or cash equivalents such as short-term bonds or term deposits. On its website, Tether publishes daily reports on the number of reserves it holds compared to the number of USDT tokens in circulation.

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