What is USDT: my personal view on the most controversial stablecoin

Oh, come on, let's talk about USDT, this “so-called stable” coin that supposedly always costs exactly one dollar. As someone who has been involved in the crypto sphere for quite some time, I can say — USDT is both a lifesaver and a headache for the entire market.

USDT or Tether is a stablecoin that is pegged to the US dollar at a 1:1 ratio. At least, that’s what its creators tell us. Personally, I always feel a bit uneasy when I hear these assurances. After all, if you dig deeper, it turns out that for every USDT token, there is supposedly a real dollar sitting somewhere in the reserves of Tether Limited. But it is practically impossible to verify this!

How I Met USDT

I remember when I first started trading crypto, USDT seemed like a real lifesaver to me. The market jumps around like crazy, everything flies up and down, while USDT is always like a rock — consistently around one dollar. When Bitcoin started to fall, I quickly shifted everything into USDT and slept peacefully.

But the more I learned about how this stablecoin works, the less I liked what I saw.

Why I don't trust USDT 100%

Do you know what worries me the most? This company Tether has been refusing to conduct a full audit of its reserves for years! They keep insisting that everything is fine, but where is the evidence? Personally, I believe that if they are truly 100% backed, then why not prove it with an independent audit?

In 2021, they paid a fine of 41 million USD to US regulators for misleading statements about their reserves. And another 18.5 million to the New York Attorney General! What does this indicate? To me, it's a clear sign that not everything is as clean as we would like to believe.

Where do I still use USDT

Despite all my doubts, I am forced to use USDT. Without it, there is simply no way on the market. When you need to quickly enter a trade or exit it — USDT is indispensable. When you need to transfer money between different platforms — again USDT.

I use it on various blockchains: ERC-20 on Ethereum ( although the fees there are high ), TRC-20 on Tron ( fast and cheap ), sometimes on Solana. The choice of network depends on where and why I am transferring.

Real Problems

The biggest problem with USDT is its systemic importance to the entire cryptocurrency market. Imagine if tomorrow it turns out that there are indeed insufficient reserves and Tether cannot fulfill all redemption obligations? This would be a disaster for the whole market, much worse than the fall of Luna or the collapse of FTX.

The market capitalization of USDT exceeds 100 billion USD! This is a colossal figure. And if this money turns out to be “funny money” — it won't seem little to anyone.

Are there alternatives?

Of course, there is USDC, which is considered more transparent, DAI — a decentralized stablecoin. But USDT is still king with about a 70% share of the stablecoin market.

I personally try not to hold more funds in USDT than I am willing to lose. This is my personal safety rule. For long-term storage, I prefer either real dollars or more reliable crypto assets.

The Future of USDT

I think USDT will be with us for a long time, unless something really serious happens or until regulators seriously tackle stablecoins. Maybe in the future we will see central bank digital currencies (CBDC), which will replace stablecoins. But for now, USDT is the necessary evil of our crypto world.

And remember: despite the name “stablecoin,” USDT can lose its peg to the dollar. In May 2022, after the collapse of another stablecoin, USDT briefly fell to $0.95. And although it quickly recovered, this is a reminder that there is nothing truly stable in crypto.

Use USDT wisely, don't keep all your funds in it and always have a plan B. After all, the main rule in the crypto world is — don't trust, verify.