Market Mad House

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


Why Tether (USDT) is the most valuable digital currency

The Tether (USDT) stablecoin could be the most successful cryptocurrency because it is a mechanism for moving US dollars.

To explain, CoinMarketCap estimates Tether a 24-Hour Market Volume of $28.654 million on 24 December 2019. Meanwhile, CoinMarketCap gave Bitcoin (BTC) a 24-Hour Market Volume of $23.591 million on the same day.

That means people traded $28.654 million worth of Tether and $23.591 million worth of Bitcoin on 24 December 2019. Yet, CointMarketCap named Bitcoin the world’s number cryptocurrency because it had a Market Capitalization of $132.038 billion on 24 December 2019. However, CoinMarketCap ranked Tether the number four cryptocurrency with a Market Cap of $4.145 billion on 24 December 2019.

How Big is the Cryptocurrency Market?

CoinMarketCap’s numbers raise serious questions about the true size and real value of the cryptocurrency market.

To clarify, people spent; or bought $28.654 million worth of Tether on 24 December 2019. Conversely, investors and speculators have sunk $132.038 billion into Bitcoin.

The funds in Tether represent funds real people trade in real time. The money in Bitcoin represents funds people are speculating with. Notably, CoinMarketCap gave the second most popular cryptocurrency; Ethereum (ETH), a 24-Hour Market Volume of $8.181 million on 24 December 2019. Ethereum is a speculative investment similar to Bitcoin.

Tether is popular because it is the most traded stablecoin. A stablecoin is a cryptocurrency they build a smart contract, or digital robot, built into. The Tether smart contract releases one US dollar from an account when you spend a USDT.

Thus, you can describe Tether as a contract to buy or trade one US dollar rather than an actual currency. Bitcoin, in contrast, functions as a real currency. In fact, all of Bitcoin’s value is in BTC itself. Tether’s value rests in the US Dollar.

Tether’s status as a contract, or an option, explains why the USDT price often exceeds $1. In fact, Mr. Market was paying a $1.01 Coin Price for Tether on 24 December 2019. Incredibly, Coinbase gives USDT an all-time high Coin Price of $1.21.

The Dollar’s popularity explains Tether’s price

People pay more for Tether because the demand for US dollars could exceed the supply. The demand for dollars is high because the dollar is the world’s most used currency.

For example, the US Dollar is the most popular trading currency and the world’s reserve currency. A reserve currency is the currency most banks hold and use. In addition, international markets price many commodities including gold, oil, and foodstuffs in US dollars.

Reserve currencies are popular because you do not have to go through currency exchange if you pay in a reserve currency. For instance, it costs less to buy Saudi with US dollars than with Chinese Yuan or British pounds.

I think Tether is popular because a USDT purchase is an investment in the world’s reserve currency. Tether is successful because it is one of the oldest and best known stablecoins.

Tether and the missing dollars

The U.S. Federal Reserve system estimates there were $43.4 trillion US dollars in circulation in 2018. In contrast, the Bureau of Economic Analysis estimates the United States’ 2018 Gross Domestic Product (GDP) was $20.89 trillion.

Thus, the dollar itself is more valuable than the United States economy. The dollar’s value exceeds US GDP because of the high demand for greenbacks around the world.

Interestingly, up to $1.5 trillion worth of $100 bills printed by the US treasury have disappeared, The Daily Hodl claims. Treasury Secretary Steven Mnuchin thinks those $100 bills are held in banks.

US Treasury Secretary explains Tether’s Popularity

“Literally, a lot of these $100 bills are sitting in bank vaults all over the world,” Mnuchin told Fox Business’s Lou Dobbs. Mnuchin’s theory is that investors can make more money holding $100 bills in safety deposit boxes than from bank interest. To clarify, Mnuchin thinks savers in some countries lose money because of negative interest rates.

Mnuchin’s theory could explain the popularity of stablecoins such as Tether. Stablecoins; such as Tether, and the Gemini Dollar (GUSD), allow people to hold dollars without the risk of holding paper currency.

Thieves steal paper currency. Corrupt authorities can seize paper currency from a bank any time they want. However, the dollars stablecoins disperse can be held in banks in the United States authorities in Latin America or China cannot reach. For instance, Gemini Dollar funds are held by the State Street Bank (NYSE: STT).

Why Chinese could buy Tether

A lot of the money in Tether could come from the People’s Republic of China. Money is leaving China at a record rate, CNN Business claims. The People’s Bank of China (PBOC) is so worried about the currency exodus that it is cracking down.

For instance, the Chinese financial regulator State Administration of Foreign Exchange (SAFE) fined Chinabank Payments $4.2 million for moving capital outside the country, CNN reports. Many Chinese are taking cash out of banks to move it out of the country.

One reason Chinese move funds outside the People’s Republic is that they cannot buy or invest directly in US dollars. US dollars can be hard to get in China because the PBOC does not let the Yuan trade in international currency markets. The reason for that is to keep funds from flowing out of China.

Stablecoins are the Most Successful Cryptocurrencies  

Buying stablecoins is one why Chinese could move funds. Predictably, the PBOC has banned private cryptocurrency trading and exchanges in China. The Chinese government makes regular efforts to shut down local exchanges, CoinTelegraph reports.

In the final analysis, stablecoins; such as Tether (USDT), are the most successful digital currencies. Speculators that want to make money in crypto need to investigate stablecoins and ignore cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).

I think the demand for stablecoins and stablecoin prices could increase if international turmoil increases. With Brexit, the trade war, US presidential election underway, and Donald J. Trump (R-Florida) in the White House, increased international tensions are a certainty.