USDT Tether has become one of the leading stable coins with an entire circulation of 2.826 billion USDT, each being worth roughly USD 1, as of this writing on 22 August 2018. The number of USDT in circulation has risen steeply by billions of USD in the past year and continues to rise, as it’s become a good alternative to USD on exchanges where USD is not available. Each USDT is backed by USD in a bank account, as can be seen on Tether’s transparency page.
Tether preserves a price of almost precisely USD 1 all the time. When looking at the long-term Tether price chart, it upholds a price of USD 1 almost all the time, in a difference of about 1 cent in either course intermittently. At the time of April and May 2018, Tether had decreased to USD 0.91 and then increased to USD 1, but other than this incident Tether’s price is stable at USD 1.
According to the laws of supply and demand, this seems slightly strange since even if a cryptocurrency is backed by USD reserves, it must still vary as demand fluctuates. In other words, just because a cryptocurrency is knotted to a commodity or USD doesn’t mean it will stay at the price of what backs it except there were some devices in place to keep the price steady.
As per Bitcoin News, basically, USDT is steadied via arbitrage no matter how users look at it. It is so extensively accepted that everyone must have an equal USD 1, particularly since they can be redeemed for USD at parity from Tether’s cash reserves, that arbitrage traders across the world and perhaps this USDT Tether itself will increase on any occasion to make arbitrage profits via USDT. This obviously keeps the price at parity with the USD long term.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]