Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Tether (USDT) a Good Cryptocurrency?

The Tether (USDT) cryptocurrency is a stablecoin. Unfortunately, Tether is not working as advertised.

To explain, a stablecoin is a cryptocurrency linked to a well-respected fiat currency. Ideally, one USDT will be worth one US dollar. The problem is that one Tether (USDT) was worth 98.88¢ USD on 19 October 2018.

Therefore, the Tether is worth slightly less than the US dollar. That shows Tether there is no one-on-one conversion of Tether to the dollar.

Tether bulls will note that a USDT is worth nearly as much as a dollar. However, that violates the promise on Tether’s website which claims USDT is 100% backed by USD.

Is Tether (USDT) Really backed by the US Dollar?

Tether’s Coin Price raises serious questions about the whole concept of stablecoins. There is no direct conversion between Tether and the dollar.

Indeed, a person converting Tether (USDT) into greenbacks lost 1.22¢ on the transaction on 19 October 2018.  That will convince many that conversion mechanisms like Uphold’s API are a better deal.

A logical conclusion is that the market prevents one-on-one conversion of Tether. To explain, Tether or exchanges have to buy dollars on the market for conversions. Hence, they have to pay the market rate for dollars.

Moreover, the exchange or Tether  charged the market Coin Price for USDT. Under those circumstances, a one-on-one conversion of Tether is impossible.

Another conclusion we can make is that stablecoins are impossible. To explain, it is not possible to create a cryptocurrency with one-on-one conversion.

One-on-one conversion is impossible because Mr. Market controls the price. The only to change that is to keep altcoins off the market. That is impossible because anybody can sell cryptocurrency anytime.

Is Tether (USDT) a Valuable Cryptocurrency?

Conversely, this does not mean Tether (USDT) is a bad cryptocurrency. Instead, it appears to be a good altcoin 98.86% of its goal which is superb. Therefore, Stablecoins work but not on a one-to-one basis.

Moreover, Stablecoins are unstable. To demonstrate, Tether was trading at 97.8¢ on 18 October 2018 and 98.88¢ the next day. Its price fluctuates just like any other altcoin.

Tether’s real problem is not its Coin Price but its lack of use. For example, Tether’s website promises “widespread integration” but provides no examples of that integration.

For instance, there are no Tether remittances, micropayments, or loans being offered. To succeed, Tether needs wide use, which it lacks.

Part of the problem is Tether’s business model which appears to be catering to traders, speculators, blockchain companies and exchanges. The problem with that is Tether is not being used by real people in the real world.

Is Ripple (XRP) Better than Tether (USDT)?

Therefore, Ripple’s (XRP) concentration on real-world uses such as remittances seems to be more realistic. To explain, Ripple is creating a mass market with remittances to 40 countries.

Ripple’s potential mass market comprises working-class people sending money to the folks back home. That is not sexy or of much interest to finance geeks but it is potentially very lucrative. Notably, there are thousands of people working as waiters or construction workers for every cryptocurrency geek out there.

The World Bank estimates that people worldwide sent $613 billion worth of remittances  in 2017. That number grew from $573 billion in remittances in 2016.

How Tether (USDT) can Cash in on Remittances

Tether (USDT) remittances could be popular because US Dollars could back them.

For instance, they accept the US Dollar on the streets in Latin American nations. Venezuelans and Argentines that regard their national currencies as toilet paper will accept the dollar.

Obviously, Venezuelans and Argentines will like stablecoins. Moreover, people will be more likely to send cryptocurrency remittances if they know they can quickly convert the funds to USD. An inherent advantage to cryptocurrency remittances is that Tether‘s platform could send them to digital wallets rather than businesses.

Like Ripple (XRP) Tether can make money by charging a low fee for remittances  sent directly to ATMs. Ripple and MoneyTap have set up a cryptocurrency remittance corridor that connects ATMs in Japan and Thailand.

With its near one-on-one convertibility, Tether could dominate the remittance market. In particular, there could be a huge demand for Tether remittances in emerging nations with weak currencies.

The Blockchain Scalability Problem Threatens Tether (USDT)

There is a major technical problem that will keep Tether from tapping markets like remittances. The blockchain scalability problem limits the speed at which cryptocurrency payments can be sent and the volume of transactions.

For example, Ethereum will transmit less than 20 transactions a second. Therefore an Ethereum based remittance system will crash if more than 20 people tried to send money at once. Obviously, nobody will use a system that crashes that fast.

Unfortunately, there is no evidence Tether has a solution to the blockchain scalability problem at its website. Ripple, on the other is able to bypass the problem with sidechains.

To explain, a sidechain is a less encrypted digital shortcut around the blockchain. Ripple’s remittance corridors are probably sidechains. An obvious risk from sidechains is that they are less secure and more vulnerable to hacking.

Therefore, the smartest strategy at Tether will be to create sidechain remittance corridors. Once the remittances are up and working, other financial products such as loans, peer-to-peer (P2P) payments, and micropayments are possible.

Why Tether (USDT) needs the Euro

Moreover, a Euro Tether with direct Euro to UDST conversion is necessary. A Euro Tether will have mass appeal in the European Union and the countries surrounding it.

Residents of nations close to Europe; like Russia and Egypt could use a Euro Tether to protect their funds from inflation. Persons traveling in the Eurozone will use the Euro Tether to receive money from back home.

A remittance product that offers buyers the choice of a Euro, a Pound, or a Dollar Tether will dominate the market.

How valuable is Tether (USDT)?

At the end of the day, Tether (USDT) has value because it nearly achieves its goal of one-on-one dollar conversion.

CoinMarketCap; for instance, gave Tether (USDT) a Market Capitalization of $2.053 billion, a 24-Hour Market Volume of $2.316 million, and a Coin Price of 98.88¢ on 19 October 2018. Moreover, there was a Circulating Supply of 2.207 billion USDT and a Total Supply of 3.08 billion USDT on the same day.

Therefore, Tether has value as a speculative cryptocurrency right now even though it has little utility. If you must speculate in a cryptocurrency Tether (USDT) is safe right now.

In conclusion, the most important lesson I learned from Tether is that a pure stablecoin is probably impossible. Despite that good stablecoins like Tether will have value because they come close to achieving their goal.

Pay close attention to Tether (USDT) folks because it has the potential to gain widespread accept thanks to the dollar connection. Obviously a strong dollar will increase Tether’s value. Both fiat currency and cryptocurrency speculators need to watch Tether; because it might provide hints to cryptocurrency’s future.