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Just in March, Tether (USDT) had a market cap of $5 billion, today it has already reached a $10 billion mark.
Digital currency Tether (USDT) has hit a landmark market cap of $10 billion advancing the surge in altcoins. The positive stride has also helped position the ‘United States Dollar backed’ cryptocurrency as the third-largest cryptocurrency to displace XRP following Bitcoin (BTC) and Ethereum (ETH).
The announcement was made on Tether’s official Twitter account and it highlights the meteoric growth in Tether’s market cap from $5 billion in March to $10 billion in July 2020. A chunk of this growth can be attributed to the conversion of most fiat currencies on exchanges to USDT.
In March 2020 we hit a big milestone as our market capitalization hit $5 billion. Now only four months later we’ve surpassed a $10 billion market capitalization 🔝
— Tether (@Tether_to) July 22, 2020
Tether in the Crypto Space
Tether is a controversial cryptocurrency with tokens issued by Tether Limited. It formerly claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies. The Bitfinex exchange was accused by the New York Attorney General of using Tether’s funds to cover up $850 million in funds missing since mid-2018.
Tether is called a stablecoin because it was originally designed to always be worth $1.00, maintaining $1.00 in reserves for each tether issued. Nevertheless, Tether Limited states that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will be redeemed or exchanged for dollars. On 30 April 2019 Tether Limited’s lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents.
Tether has repeatedly claimed that they would present audits showing that the number of tethers outstanding is backed one-to-one by U.S. dollars on deposit. They have failed to do so. A June 2018 attempt at an audit was posted on their website in June 2018 which showed a report by the law firm Freeh, Sporkin & Sullivan LLP (FSS) which appeared to confirm that the issued tethers were fully backed by dollars. However, FSS stated that “FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles,” and “the above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.”
Brock Pierce is often named as one of the major figures behind USDT. He alongside Reeve Collins and Craig Sellars announced the launch of Tether’s precursor RealCoin in July 2014. Tether has been known as a controversial digital currency. On 20 November 2018, Bloomberg reported that U.S. federal prosecutors are investigating whether Tether was used to manipulate the price of Bitcoin (BTC). Despite many hurdles, the coin has grown to be a formidable Stablecoin to date.
Tether Use Cases Fueling Its Market Cap Growth
Tether was designed to build the necessary bridge between fiat currencies and cryptocurrencies so as to offer stability, transparency, and minimal transaction charges to users. Tether is presumably pegged against the U.S. dollar and it maintains a 1 to 1 ratio with the U.S. dollar in terms of value. However, there is no guarantee provided by Tether Ltd. for any right of redemption or exchange of Tethers for real money – that is, Tethers cannot be exchanged for U.S. dollars.
The growth in the use of Tether is best attributed to the extreme volatility of digital currencies. The world economic upturn caused by the coronavirus pandemic has also sent doubts to actors in the money market. The economic instability the pandemic caused necessitated the switch to reliable assets that can help safeguard assets in the case of an economic recession that causes a devaluation of traditional fiat currencies.
Many turned to gold while most crypto enthusiasts relied on Bitcoin (BTC) for this currency safeguard. The recorded growth from March to date can also be explained by the attractiveness of USDT as a stable coin.