You may have seen USDT listed on the exchanges and wondered what it is for. Is it a dollar ($)? Is it a crypto? We’re going to reveal all in this quick explainer
The first thing to state is this:
1. USDT is a cryptocurrency
2. 1 USDT has the same value as $1 (this is important)
3. You can buy it, sell it and trade it just like you can with any other crypto (e.g. with £/$/€ Bitcoin, Ethereum, alt coins, depending on the exchange)
Can you make money investing in USDT?
USDT is a clever tool but…
It’s not an asset you invest in to make money.
That’s not it’s purpose.
It’s not a form ‘digital gold’ (like Bitcoin, a finite resource)…
It’s not a form of ‘digital oil’ (like Ethereum, used to power things in cryptoland)…
It’s a not a stake in an exciting new project (which could go up in value when it gets more widely adopted)…
It’s none of those things, in fact, in a way it’s the opposite.
It’s called USDT or USD Tether because the idea is that it is always tethered to the USD. It is the equivalent of a dollar in the crypto space.
$1 will always = 1 USDT crypto.
So it won’t shift in value with the ebbs and flows of the crypto market cycle and your 1 USDT today will still be worth $1 in 6 months or 6 years time.
Perhaps the best way to show this is by looking at the USDT page on Coin Gecko. You can take a look at it here. You should see that under ‘price’ USDT is listed either as $1 or extremely close to it (typically $0.999) on the different exchanges.
That is because each USDT is backed by an actual $, or at least it is supposed to be (there has been some controversy over that, see here if you’re interested).
So what is USDT used for?
It provides stability in the crypto space.
Bitcoin can drop 20% or rise 20% over the course of a month but USDT should always remain the same.
So that makes it an effective trading currency.
If you want a stable currency with which to trade cryptos (which isn’t going to bounce around all the time) then it can be a good option.
Particularly if you are trading alt coins which can be prone to wild jumps and drops in value. Often there will be a market pair for an alt coin with USDT where there won’t be for actual ($) USD.
Hopefully that makes sense.
USDT is a token which represents a dollar. You’ve got 1 USDT, it means you’ve got $1 equivalent. It’s not going to go up or down or vary from that.
Primarily it’s a way for you to trade volatile alt coins knowing that the source currency you’re trading in is stable.