Today I just wanted to finish what I started yesterday. I would like to talk about how Tether (USDT) is perceived. What people think it is and what I think is useful to.
So as (almost) everyone of you know by now, USDT is an USD backed crytocurrency available in some of the biggest exchanges in the world to serve as a surrogate for the actual United States of America's issued currency.
It gives this exchanges the possibility to offer it's users the chance to trade their crypto for "real money" without the legal obligations that this would bring to them.
For some people, this gives them the confidence they need to invest their hard earned money into cryptocurrencies in one of these exchanges. They feel that in case of a strong pullback or even a crash, USDT offers them the opportunity to keep their money safe while the prices recover.
And this is truth... in a way.
Let's take as an example the current situation. In the last month and a half we've seen a strong pullback in value of most of the cryptocurrencies currently being traded in the market. Bitcoin, most notably of all.
In this situation, anyone that sold their BTC (or any other coin wich price went down this month) for USDT at a higher price than it is today and decides to buy again, will earn some BTC to their portfolio. This wolud earn them even bigger gains once the BTC price recovers to it's original value.
So we have to say that in this particular situation, USDT works pretty fine for what it's supposed to be good for. A value refuge in a volatility environment. Negative volatility that is. Someone could lose money if he/she goes in and out of USDT at the wrong time. But that's not a problem, just part of the known risks of trading.
But what would happen if instead of pullback (as big as this can be) we have a crash? A real crash. A Bitconnect kind of crash.
I know, this seems unlikely and far fetched to me as I am sure that it seems to you. If we weren't confindent in the future of cryptocurrencies we wouldn't be writing and reading each other in this platform, but the truth is we've had crashes in the past so we know that it could happen again.
And USDT is supposed to be a way of keepeing our investments safe on that situation. But it is not. And that's OK.
In case of a real crash, a huge amount of investors would seek to sell their "not USD backed" crypto for USDT. All at the same time. This, even when USDT value is supposed to be pegged to a 1 USD value, would bring USDT value up causing people who fled out of other crypto into USDT to actually lose money while doing it. Then all of these people would sell their USDT, all at the same time, bringing it's value down again and making them lose money. Again.
So, why if USDT can't save our savings and investments in case of a crash people seem to think otherwise? I know, you are going to tell me that this isn't truth. But why then was the market hitted so hard by the news of US regulators investigating Tether and Bitfinex?
In conclusion, Tether is useful. Tether can't save your money from a crash. And it doesn't matter
Invest in crypto only if you're confident on it. On it's technology and it's future. And of course, invest only what you can afford to lose.
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