Market Mad House

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


What Value does Tether Have?

Many people are asking “what value does Tether have;” because the stablecoin was the seventh most valuable cryptocurrency, on 9 August 2019.

In detail, CoinMarketCap ranked Tether (USDT) as the seventh most valuable altcoin with a Market Capitalization of $4.045 billion and a 24-Hour Market Volume of $19.02 million on 9 August 2019. CoinMarketCap based those numbers on a Circulating supply of 4.03 billion Tether and a Total Supply of 4.095 billion USDT.

Therefore, Tether is the most valuable stablecoin on the market. Notably, Tether had a Coin Price of $1 on 9 August 2019. Thus, Tether achieves its goal of being a stablecoin that matches the price of the US Dollar some stablecoins do not.

What is Tether?

Tether is a stablecoin. To explain, a stablecoin is a cryptocurrency that contains a smart contract linked to a trust account.

A smart contract is an algorithm; or digital robot, that performs a specific act. When you make a USDT purchase, the Tether smart contract releases one $1 in US currency to the merchant.

They keep the dollar in a trust account. Therefore, one Tether stablecoin does not contain $1 as many people think. Instead, they peg the Tether (USDT) to a dollar, which theoretically keeps its value at $1.

They call cryptos like Tether, stablecoins because they are theoretically more stable than regular cryptocurrencies. However, the prices of some stablecoins like Paxos Standard Token (PAX) are sometimes higher or lower than $1. The concept is the coin is stable because it they peg it to a dollar.

In addition, the stablecoin’s value will fall or rise with the fiat currency they peg it to. Thus, Tether’s value will fall if the dollar falls.

Is the Euro Tether Here?

Interestingly, Tether’s website mentions a Euro Tether (EURT). However, I could not find the Euro Tether on the popular cryptocurrency ranking sites; CoinMarketCap, CoinSwitch, and CoinGecko.

Theoretically, the Euro Tether will work like the USDT but be worth 1€. The EURT makes sense because 37 countries; including 19 member states of the European Union (EU), with a population of 343 million people use the Euro as their official currency. Interestingly, eight countries outside the EU use the Euro as their currency.

Consequently, the Euro is the second most traded and second most valuable currency in the world after the US dollar. In addition, 240 people million worldwide were using currencies they pegged to the Euro in 2018.

Countries using the Euro include; Germany, France, Italy, Spain, the Netherlands, Ireland, Portugal, Greece, Belgium, and Estonia. Notably, three of Focus-Economics’ 10 largest national economies in the world use the Euro. They are number four Germany; number seven France, and number eight Italy.

How Tether Works

Tether is popular because its platform uses both the Ethereum and Bitcoin transport protocols.

Thus, you can convert Tether into Ethereum (ETH); ERC20 tokens, and Bitcoin (BTC). This drives Tether’s value because Bitcoin was the most valuable crytpcourrency and Ethereum the second most valuable cryptourrency on 9 August 2019.

To clarify, Ethereum Request for Comment; or ERC20, tokens are custom-made cryptocurrencies they build on the Ethereum blockchain. In fact, Investopedia estimates there were over 181,000 ERC20 compatible tokens on the Ethereum main network on 16 April 2019. Consequently, they build most cryptocurrencies with Ethereum and most blockchain platforms use ERC20 tokens.

Importantly, Tether also operates on the EOS, Tron, Omni, and Algorand blockchains, FXStreet’s John Isige claims. Thus, Tether could operate on six blockchains, making it the most versatile stablecoin I know of.

In contrast, most stablecoins operate on just one blockchain, usually Ethereum. Thus, it is difficult to convert contains like PAX into Bitcoin or EOS (EOS).

Tether makes $100 million transaction

Interestingly, the Bitfinex cryptocurrency exchange made a $100 million deposit into Tether’s trust accounts on 1 July 2019, a press release claims. The money deposited came from a loan Bitfinex made to Tether.

Currently, Tether maintains deposit accounts at Deltec Bank & Trust Limited in the Bahamas. Deltec offers private banking, fund administration services, merchant banking, and wealth management.

Unfortunately, Deltec’s base in the Bahamas will lead to charges Tether is a money-laundering tool. To explain, Deltec is an offshore bank, and Tether seems to offer an anonymous means of transferring money to it.  

Is Tether Legal?

Additionally, I could not find information about Know Your Customer (KYC) or Anti-Money Laundering (AML) requirements on Tether’s website. To clarify, many countries require all financial institutions to comply with KYC and AML requirements.

Interestingly, the New York State Attorney General’s Office is trying to force Tether and Bitfinex to divulge document, Tether admits. Conversely, New York Supreme Court Judge Joel M. Cohen blocked the Attorney General’s motion on 29 July 2019.

Tether and Bitfinex’s attorneys argue that the Attorney General has no jurisdiction their operations. Tether’s attorneys claim the Attorney General lacks jurisdiction because Tether and Bitfinex are not in New York State.

Is Tether Good for Speculators?

Tether (USDT) is an interesting cryptocurrency and stablecoin but I am skeptical of it.

Tether’s use of a bank in the Bahamas could create serious legal problems for the cryptocurrency. Moreover, other cryptocurrencies like the Gemini Dollar (GUSD) use trust accounts in American banks. For example, they keep the funds they peg the Gemini Dollar to at the State Street Bank (NYSE: SST) in Boston.

Finally, media reports claim big financial institutions like JPMorgan Chase (NYSE: JPM) and Goldman Sachs (NYSE: GS) are preparing their own stablecoins. If those claims are true, the Big Banks could kill Tether.

To explain, I think there will be little demand for Tether if you can get stablecoins issued by big banks in the United States. I believe large platforms like Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX), Spotify (NYSE: SPOT), Apple (NASDAQ: AAPL), and Steam will accept a Chase or Goldman Sachs stablecoin.

However, Amazon and Spotify are unlikely to accept a stablecoin pegged to funds in an offshore bank account. In particular, corporations could avoid Tether if it lacks KYC or AML compliance.

Therefore, I advise speculators to stay away from Tether (USDT) and all other stablecoins until we see if big bank stablecoins are for real. My prediction is there will be little or no market for Tether, if Goldman Sachs and Chase offer stablecoins.