Questions About Tether Just Won’t Go Away. Does the Crypto Market Care?

[Malam90]

As the crypto market continues to rally, an old debate reignites on whether the most important stablecoin in trading is really stable. Stablecoins are a key cog in the cryptocurrency machine. The recent bull market has rekindled a long-simmering debate over whether the biggest such coin is, well, stable.

While bitcoin (BTC, -0.02%), ether (ETH, -0.9%) and altcoins have seen astounding price rallies over the past four months, some of the most important growth has been in the cryptocurrencies known as stablecoins. These blockchain-based assets, usually pegged to the U.S. dollar, are a critical part of cryptocurrency trading activity and have taken in billions from investors who use them on exchanges around the world.

The biggest of them all, tether (USDT, +0.01%), has an eye-popping $25 billion market capitalization. However, tether’s critics charge its lack of transparency in everything from finances to the way its issuing company operates threatens the overall crypto market.

At issue is one of the most fundamental questions hanging over the cryptocurrency markets: Is the price of bitcoin and other cryptocurrencies inflated because the backing of tether may not be as strong as people think it is?

Why the market uses stablecoins
Despite hitting a $1 trillion market capitalization in January, freely floating cryptocurrencies, though more liquid than before, are still quite volatile. For example, for the past five years, bitcoin hasn’t been able to consistently maintain a 30-day volatility below 20% as gold does. This makes claims that bitcoin is “digital gold” a poor fit, which is where stablecoins come in. Source

[whyrqa]

Of course, I would like to know how, when the demand for USDT increases, its price does not rise, like other cryptocurrencies. Although it is clear that this cryptocurrency is just the equivalent of a dollar. But if many have doubts about providing USDT with a dollar, then its value is guaranteed primarily by the demand, since USDT is the most popular cryptocurrency, which allows you to minimize your losses in the cryptocurrency market.