The popularity of cryptocurrencies is growing, the digital asset market is attracting more and more investors, but the risks remain the same. Perhaps the most obvious of them is the instability and high volatility of cryptocurrencies. Changes in the exchange rate by 10-20% per day is an ordinary phenomenon for the crypto market. One of the most effective ways to minimize risks is investing in stablecoins
What are stablecoins
Stablecoins are coins whose value is backed by other assets. For obvious reasons, coins pegged to the US dollar have gained the greatest popularity. The most famous of the dollar stablecoins is USDT (Tether), which is actually a digital version of the dollar.
USDT combines the stability of a reserve currency with the functionality of a digital asset. Stablecoins bridge the gap between traditional finance and the blockchain world. The USDT exchange rate is always close to parity with the USD, deviations from the ratio of 1:1 are usually insignificant.
Using USDT in trading and money transfers is much cheaper, faster and more convenient than fiat or digital currencies. Stablecoins provide the ability to quickly fix profits without converting crypto to fiat. In addition to the speed of transactions, the size of the transaction fee is also of considerable importance; in transactions with fiat currencies, the fees are much higher. The dizzying ups and downs of the crypto market during 2021 and 2022 naturally caused the active growth of the stablecoin market.
USDT forms the largest number of trading pairs and is often used as an intermediary asset. If the platform does not provide direct ETH to CAKE conversion, two consecutive transactions involving USDT will be required.
USDT cryptocurrency protocols
USDT became the first dollar stablecoin. It has been in existence since 2015 and as of today it ranks third in terms of market capitalization. Therefore, the USDT indicator is second only to Bitcoin and Ethereum, but it still has no equal in terms of trading volumes.
Initially, the token worked on the basis of the Omni Layer protocol, later the issue was tied to the Ethereum blockchain. Now, most of the USDT functions as ERC-20 tokens, some – as TRC-20 tokens, and the number of supported blockchains is gradually increasing. Already, their list includes Solana, EOS, Liquid, Algorand and several others.
Where to buy USDT
Since we are talking about the most highly liquid cryptocurrency, you can freely buy it on any cryptocurrency exchange. The choice of platform will depend on what kind of sovereign currency you have and in which country you live.
How can Tether be used?
Like any other cryptocurrency, USDT can be stored, used for trading or receiving passive income. Due to the low volatility of the asset, speculative strategies and long-term storage do not look very attractive. They only make sense if you don’t live in the US and your sovereign currency is subject to high inflation. In addition, the developers do not guarantee the exchange of USDT for USD, that is, the risks typical for cryptocurrencies are also inherent in stablecoins.
Trading is potentially more profitable, but also more risky. However, you can simply exchange part of USDT for XMR or other promising assets and thus diversify your portfolio.
Gradually, USDT is acquiring more and more features that bring it closer to the dollar. The coin is widely used as a means of payment, including for paying for real goods and services. In addition to holding tokens on the wallet, passive income opportunities are already available today. Their yield is close to that of a classic bank deposit. The opportunity to earn money is provided by:
- Platforms for providing liquidity.
- investment platforms.
- Crypto lending.
USDT is a good tool for savings, savings and capital protection in times of crisis. However, it should not be considered as a highly profitable asset.