With the launch of our new USDT perpetual contracts, we are pleased to present a detailed guide to Tether, explaining what Tether is, the volume of trades it accounts for, and more.
General Description of USDT
Tether (USDT) is a cryptocurrency designed to have each token represented by its underlying asset as a US dollar. Each USDT token is tied to a U.S. dollar, which is held on Tether Limited’s reserve balance and can be obtained through the Tether platform. Tether has been released on the Omni, Ethereum, Tron, EOS, Liquid, and Algorand blockchains (Source).
Key USDT stats (All stats as of April 10, 2020) –
- The average time a token stays at an address before it is transferred – 6 weeks (Source).
- Total USDT in circulation – $6,673,040,700.24 USDT (Source)
- 55.33% of transactions in USDT are in Eastern trading sessions (last 14 days) (Source)
- 44.67% of transactions in USDT are in western trading sessions (last 14 days) (Source)
What is a Stablecoin?
Stablecoins are cryptocurrencies designed to minimize volatile price fluctuations in the cryptocurrency environment by linking each token to the cryptocurrency’s underlying fiat money or exchange-traded commodities such as precious metals. Created with the same characteristics as other popular cryptocurrencies, Stablecoin offers simple transactions through an existing cryptocurrency infrastructure with untrusted networks using an appropriate blockchain browser. This allows payments requested in a specific fiat currency or precious metal and can protect recipients from sudden price changes.
While USDT’s reserve and issuance system are controversial, compared to most stack coins, USDT still offers the longest track record of performance and the highest solvency.
Tether is predominantly based on the Ethereum blockchain.
When considering which blockchain to keep USDT on, it is important to note that over 68% of USDT tokens exist as ERC-20 (Ethereum) tokens. This affects liquidity pools, wallet storage, trading volume, and the ease of exiting USDT. This benefits trader because it gives them multiple options if they decide to switch to one blockchain or another. The chart below shows a breakdown of the distribution of USDT across Ethereum, Omni, and Tron blockchains.
Where should I store USDT?
Every trader has different needs concerning accessibility, security, and privacy. A brief outline to help understand the trade-offs is as follows – Is the storage custodial or non-custodial? Is storage done in hot or cold wallets?
The custodial option is to store USDT on an exchange such as By bit, which allows traders to have instant access to trading opportunities so the trader can quickly open and close a position. The trade-off is that users can sacrifice privacy and security controls for convenience.
A non-custodial storage option such as ShapeShift, a non-custodial decentralized exchange, provides the trader with smaller pools of liquidity, so the option to open and close positions still exist, but with increased price slippage. However, this gives users security and trust compared to a custodial exchange.
The other choice a trader makes regarding storage is between hot and cold storage. Hot storage is the use of a web wallet in which applications are directly connected to the Internet. Cold storage involves the use of hardware wallets and paper wallets such as Ledger and Trezor, which provide forms of maximum privacy and security but lack the trading advantages provided by the major exchanges. Some trading platforms, such as By bit, use more advanced institutional-grade cold storage solutions.
As you can see from the bar chart below, Omni traders prefer to store their USDT outside of exchanges by a ratio of almost 2:1, while Tron traders prefer to store their USDT on exchanges. ERC-20 traders’ preferences seem to be evenly divided here.
Among similar exchanges, the largest amount of USDT is stored on Binance
Let’s look at the data collected below from the five largest cryptocurrency exchanges. We see that Binance and Huobi hold the largest amount of USDT with a significant gap.
Where are the whales?
A whale address is considered a non-exchange address that contains enough tokens to be among the top 40 addresses. Whales are known for acting as an influencer in the market, being able to get rid of large amounts of tokens or pour them in, and overload exchange stacks. They are much more influential, acting through management votes, small market capitalization tokens, stacking, and other means.
Stablecoins are not subject to the high risks posed by whales because they are designed to withstand price action, which is the primary goal of whale action. Nevertheless, it is helpful to be aware of the allocation and centralization of tokens. Here’s the breakdown for whales with non-exchangeable USDTs.
The trading volume speaks for itself
The data below shows some of the preferences of traders. Based on data from CoinMarketCap, traders use USDT more than bitcoin and other leading cryptocurrencies. Trading pairs with USDT have significantly higher volume than pairs with most cryptocurrencies, even pairs with BTC.
Tether offers deep trading pools, volatility protection, and transparency
Traders have a valuable resource in the form of USDT as a means to find and protect profits. The ability to quickly exchange a top cryptocurrency for a stablecoin such as USDT allows for short-term and long-term trading strategies. Volatility as a result of wild price swings provides a unique haven for market price conditions.