Tether

Tether

USDT
Current Price $1.00 (-0.4%)

BMJ Score: 3.1

Market

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Description

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The Quick Pitch

Tether is an altcoin that claims to be backed by fiat currencies. At the time of this writing, the digital currency is pegged to the U.S. dollar (USDT) and the euro (EURT). 

The digital currency will "soon" be capable of supporting the Japanese yen, according to the Tether website

Basically, Tether provides the benefits of blockchain, but it is backed by traditional currency, according to analysis conducted by Bitcoin Market Journal. 

As a result, it aims to be a "stablecoin" and to be far less volatile than other digital currencies. 

The Basics

Tether is issued by a company named Tether Limited, which is based in Hong Kong. 

Units of this digital currency were originally issued on the bitcoin blockchain using the Omni Layer protocol, according to the Tether whitepaper. Each of these units has a corresponding unit of fiat currency. In other words, Tether Limited claims to have one U.S. dollar for every tether backed by this particular fiat currency. 

Use Cases

Tether has three specific use cases. These are:

  1. Exchanges: These marketplaces face many challenges when it comes to accepting fiat deposits and withdrawals, especially when it comes to establishing relationships with payment providers.
  2. Individuals: Tether allows individuals to make secure transactions using U.S. dollars by eliminating the middleman and also removing the risks associated with storing fiat funds on an exchange. 
  3. Merchants: By using Tether, merchants can price their goods in the U.S. dollar instead of a digital currency such as bitcoin. Digital currencies can be very volatile, so this makes it easier for buyers.

Concerns

Market observers have raised more than one concern about Tether. 

For starters, some analysts have voiced doubts that Tether Unlimited has the fiat currency needed to back up all the units of tether. There are upwards of 2.3 billion units of tether circulating at the time of this writing, according to CoinMarketCap. Tether Unlimited printed 850 million tethers in January 2018, but then failed to provide proof that it had the fiat reserves needed to back up this digital currency, MarketWatch reported. 

Further, tether is backed by major fiat currencies, which goes against the decentralized nature of many digital currencies. These major currencies, such as the U.S. dollar and the euro, are printed by central banks, whereas digital currencies are frequently issued as a result of mining. 

There are also concerns about tether's management. Jan Ludovicus van der Velde holds the position of CEO at both Tether Limited and Bitfinex, a major digital currency exchange. Van der Velde is not alone in playing a key role at both of these companies, as several individuals serve as executives at both of these firms, according to MarketWatch

Some have claimed that Bitfinex has been involved with the manipulation of both tether and bitcoin, CNBC reported. Litecoin creator Charlie Lee wrote a Twitter post mentioning concerns that the former digital currency was being used to inflate the price of the latter, according to The Financial Post

Finally, the tether website's legal section states that "Tether Tokens are backed by money, but they are not money themselves." 

Bitcoin Market Journal analysts identified this part, in particular, as a red flag. 

Wording in Tether's whitepaper raises a red flag!

The Bottom Line

The tether digital currency may certainly serve a valid purpose, but many concerns and doubts surround this particular altcoin. Our analysts provided it with lukewarm reviews, rating its short-term potential a 2.9 out of 5 and its long-term potential a 3.1 out of 5. 

Investors who are considering getting involved with any digital currency should be sure to conduct the needed due diligence. 

Want to receive regular analysis of other altcoins, as well as ICO evaluations and industry news updates? Subscribe to the Bitcoin Market Journal newsletter!

Bitcoin Market Journal analyst briefing for Tether.

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Team Members

J.L. van der Velde (LinkedIn)
Giancarlo Devasini (LinkedIn)
Stuart Hoegner (LinkedIn)

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