Tether (USDT) Stablecoin and Cryptocurrency
Tether is a stablecoin (most popularly pegged to the US dollar as USDT) that works on several blockchains, including Bitcoin, Ethereum, and Tron. Its main advantage is providing a representation for USD on decentralized blockchains, which allows performing transactions without worrying about volatile cryptocurrency exchange rates.
Example: You transfer $100 USDT on the Ethereum blockchain (ERC-20) from your own wallet to your broker's wallet. Normally, the transaction reaches the network instantly. However, to get confirmed, the transaction needs to be incorporated into the next Ethereum block, which takes about 10 seconds. So, the entire transfer takes (under normal conditions) just up to 10 seconds to get validated. Your broker may decide to wait for 10-20 confirmations before actually updating your balance. Even then, the whole process takes just up to 5 minutes.
USDT is the most popular Tether coin, but there are others as well, including EURT (pegged to the euro), MXNT (pegged to the Mexican peso), CNHT (pegged to the Chinese yuan), and XAUT (pegged to gold).
USDT is 1:1 pegged to the US dollar, but there are small variations in the exchange rate, though most of the time they are much less than 1 cent in both sides.
Tether is operated by Tether Limited, a company, which is owned by iFinex and which also owns Bitfinex — a popular cryptocurrency exchange. Tether Limited claims that USDT is fully backed by the company's reserves.
As a Forex trader, you might be interested in Tether because it is a simple, fast, and decentralized way to move funds to your trading account and out of it. It is also handy if you prefer to use cryptocurrencies whenever possible, but find that keeping a Forex trading account in USD more convenient. It is easy to exchange crypto to USDT and then transfer USDT to the broker, receiving 1-to-1 USD balance.
Tether is often criticized for not being transparent regarding its reserves, but that should be of concern only when considering USDT as a store of value whereas to Forex traders, its main appeal is the medium of exchange due to its ease of transfer and decentralized nature.
Another concern is the wallet security — being blockchain-based USDT transfers are final and irreversible. There are basically two options to use Tether for your currency trading needs:
- A cryptocurrency wallet that supports Tether stablecoins. A good example of such a wallet is MetaMask, which supports USDT (ERC-20) based on the Ethereum blockchain. Another example of a USDT wallet is Exodus, which supports USDT on multiple networks.
- A cryptocurrency exchange, where you will be able to store and exchange your USDT to cryptocurrencies or fiat currencies. A good example of such an exchange is Bitfinex.
In both cases, you have to be very careful with your keys (wallets) or account credentials (exchanges). Use only storage methods that you understand well.
Did you know? Despite Tether facing constant criticism regarding their reserves, USDT is mostly trading at a premium, albeit tiny, to the US dollar.
USDT is a great payment method for traders who are looking to make transfers to and from their brokerage accounts comfortably and with few restrictions. Quite a few FX brokers support Tether as an option to deposit or withdrawal funds. Here is a short list of recommended Forex brokers supporting Tether (USDT):