Cryptocurrencies are far riskier than equities; everybody and their dog knows this. Volatility is perhaps the biggest reason that keeps investors wary of putting money into cryptocurrency . This isn’t baffling. It’s hard-earned money, and investors wouldn’t want to gamble it away by taking “bets” in a risky asset class.
So, should these investors completely avoid exposure to crypto?
Well, cryptocurrencies show almost no correlation with equities, bonds, gold, and commodities. This means they are an excellent addition to a portfolio from the point of view of diversification. They can diversify and potentially minimize a portfolio’s overall volatility.
Some investors vow to never become part of the crazy crypto world because of the way its charts swing. However, there is hope – it’s called Tether (USDT).
What is USDT?
USDT is a cryptocurrency just like BTC, ETH, and XRP. It’s traded on a crypto exchange too. However, there is one fundamental difference. USDT is significantly more stable.
Why is that? One might wonder.
USDT belongs to a class of cryptocurrencies known as stablecoins. Stablecoins are pegged to the value of another asset, usually a fiat Cryptocurrency, which makes it less volatile. USDT is pegged with the value of USD and the creators claim that the coin is backed 1:1 with traditional fiat.
As of today, USDT is the world’s third-largest crypto by market cap at $61.8 billion as of the day of writing. Therefore, investors never have to worry about liquidity. It also shows how popular USDT has become in the crypto-verse. If you’re keen on riding the USDT wave, you can buy USDT on MoonPay. If not, perhaps the following benefits will help.
Benefits of USDT
USDT offers a slew of benefits to investors. Sure, stability is its core value proposition, but it has several other things going for it. Since USDT helps digitize the USD, it’s been viewed by many as the most viable way for cryptos to become mainstream.
Market estimates show that USDT could offer decent returns over a three-to-five-year time horizon. For investors looking to preserve capital while still gaining exposure to the crypto-verse, USDT is a perfect choice.
Stability and security
Undeniably, USDT is one of the most stable candidates in the crypto-verse today. Investors looking to gain exposure to a relatively low-risk Cryptocurrency could see USDT as a go-to in an otherwise largely volatile market. For example, let’s look at how the prices of USDT moved over the past year and compare it with BTC’s price movements.
The prices make the risk-reward ratio abundantly clear. It shows how USDT is suitable for low-risk investors while BTC appeals to investors who want to take on more risk to chase higher returns.
In addition to being relatively stable and low-risk, USDT is also one of the most secure cryptos.
Since USDT operates on the blockchain network, it offers excellent security. The transactions are completely secure so investors never need to worry about any dirty business while buying and selling their USDT.
The blockchain networks (which include Ethereum, Algorand, EOS, OMG Network, and Tron) conduct periodic audits for ensuring that the code is updated, adequately secure, and in compliance with the network’s current framework. Even Tether confirms USDT ‘s compliance with all of these networks on a periodic basis.
To make security more concrete, the company fully complies with the AML and KYC guidelines. Investors who want to open an account must submit their AML and KYC documents, failure to do which makes it impossible to trade USDT on the platform. However, some experts do view this as USDT’s shortcoming too.
Fast transaction times and low transaction fees
USD fund transfers via traditional banking could potentially take anywhere between one to four days depending on the mode of transfer used. If the transfer is initiated overnight or during weekends, the transaction could take even longer to process.
Fortunately, USDT transactions are much faster. This is great for Cryptocurrency traders whose profits may disappear if the transfers take that long. They need to be able to transact within minutes rather than days.
Time isn’t the only critical factor that makes USDT transfers more appealing. There is a transfer fee involved on USD transfers, and this fee can often be quite expensive. For instance, transfers via SWIFT (Society for Worldwide International Financial Telecommunication) end up costing the transferer somewhere about $20 to $30, or even more.
To add to this, if the investor is using a currency that the exchange doesn’t support, the investor will also pay extra for FOREX conversion, plus a percentage on the amount of transfer if the fiat used by the investor isn’t supported by the exchange.
On the contrary, the investor will pay no fees on transferring USDT between wallets. These two advantages save the investors time and money, and let’s face it—they’re prominent factors.
USDT enjoys wide acceptance across the industry. It can be bought and sold on pretty much any major exchange, which makes it a terrific choice for investors who want to invest in cryptocurrencies that aren’t paired with other mainstream cryptocurrencies such as ETH, BTC, or LTC.
It’s much easier to convert USDT into cash than other currencies. The easy conversion of USDT into USD and vice versa makes USDT one of the major gateways for investors into the world of Cryptocurrency.
Several exchanges outright deny the purchase of Cryptocurrency with fiat money. However, these platforms will gladly accept USDT. This means a person can buy USDT from one place, transfer it to another exchange of their choice, and exchange USDT for altcoins that they find interesting.
A shield against inflation
Investors in a country with a weak currency, or a country that witnesses high inflation need investments that can at least preserve the currency’s value. In such cases, USDT functions like a lifejacket. Its value is pegged to the USD, which means an investor is better off storing their money in USDT than their own currency.
For instance, let’s assume someone from China had purchased 10,000 USDT in June last year when CNY/USD was quoting at 0.1401 for $1401. Today, the CNY/USD quotes at $0.1567. Redeeming the USDT today will leave the investor with $1,567. The investor didn’t just beat the inflation but came out with a positive return.
In addition to the above-mentioned benefits, USDT offers the following miscellaneous benefits as well:
- Strong support network: USDT has the support of a strong line-up of supporters including Kraken, Poloniex, HitBTC, ShapeShift, and Bittrex. This makes USDT a trustworthy crypto to own, unlike several other altcoins.
- Uses a trusted blockchain: USDT operates as an ERC20 token on Ethereum’s blockchain – a blockchain that is properly tested, adequately developed, and decentralized.
- User-friendly: USDT offers one-to-one backing so even users that have no technical background can navigate their way through USDT transactions easily.
- Hassle-free integration: It’s easy to integrate USDT with exchanges, merchants, and wallets.
Safely storing USDT
Normally, crypto is stored on a compatible wallet after it’s purchased. There are several options for storing coins like Bitcoin and Ethereum, but storing USDT is a little tricky. Even though USDT can be stored on plenty of wallets too, it isn’t just your average cryptocurrency.
The first option for investors with USDT is the exchange or trading platform from which the USDT was purchased. However, it’s best not to leave funds with these third parties for too long, though they are fine for storing over short durations such as when trading.
There’s one caveat here, though. Withdrawal of funds from the exchange to a wrong USDT-supporting blockchain can result in loss of funds. Ensure that the options have been thoroughly researched before making a withdrawal.
Another, more secure option for storage is desktop and mobile wallets such as MetaMask and TrustWallet, or hardware wallets like Ledgers. Ultimately, it’s about finding a wallet that is compatible with the network an investor uses for USDT, whether it’s Binance Smart Chain, Ethereum, or any other blockchain.
USDT is a secure, low-risk candidate
Stablecoins are an interesting opportunity and a viable gateway into the crypto space for investors that want to gain exposure without taking on excessive risk. Instead of taking positions in ETH/EUR or BTC/USD, investors can trade USDT for purchasing almost any major crypto asset without any significant friction.
Eliminating the need for multiple instances of asset conversion to take positions in a preferred pair increases the industry’s appeal and lowers barriers to entry. USDT continues to remain the most popular choice among stablecoins with ample liquidity worth millions of dollars.
Though there are some controversies around USDT, it is capable of acting as a safe haven for those operating in a highly volatile market. It is currently being used by millions around the world who seek decentralized finance across countries and continents.
Author Bio: Arjun Ruparelia
Email – firstname.lastname@example.org
An accountant turned writer, Arjun writes financial blog posts and research reports for clients across the globe, including Skale. Arjun has five years of financial writing experience across verticals. He is a CMA and CA (Intermediate) by qualification.