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Tether and Bitcoin have been put through a lot of speculation in recent days, with many people claiming tether as an instrument to manipulate Bitcoin prices (and other cryptocurrencies as well). Tether is the subject of a lot of scrutinies, including an investigation from the New York Attorney General’s office and class action lawsuits. One such lawsuit claims that “control of an exchange and the opportunity to trade with non-existent money can allow a single entity to influence cryptocommodity prices dramatically”. To answer all the speculation surrounding USDT and its relationship with Bitcoin, let’s first cover the basics.
What is USDT?
USDT or Tether is one variety of cryptocurrencies called “stablecoins” whose value is tethered to a physical asset. In Tether’s case, the value of the stable coin will always mirror the value of the USD, bridging the gap between cryptocurrencies and fiat currencies. This is different from other cryptocurrencies as they have no speculative value but serve as a medium of exchange and a store of value.
Stablecoins like Tether combine fiat currencies’ stability and security while enabling users to easily transfer money in a decentralized manner like other crypto exchanges. This ensures stability, minimal transaction fees, and transparency to the users.
The Tether tokens are collateralized stablecoins, wherein each token is backed by a fiat currency, including the likes of the US dollar, the Euro, the Yen, or even INR. Though backed by several fiat currencies, the value of USDT will always be pegged to one US dollar. For instance, USDT to INR will always mirror the exchange rates of USD to INR.
However, there is no guarantee provided by Tether Ltd. for the exchange of Tether for real money. You convert your USDT to INR or any other fiat currencies by using crypto exchange platforms like WazirX.
USDT and Bitcoin
At first glance, little seems to be in common between USDT and Bitcoin, apart from the fact that both USDT and Bitcoin are cryptocurrencies. However, according to allegations made by many parties (law enforcement and economists alike), Tether has been used to manipulate Bitcoin prices in the past actively.
In a study titled “Is Bitcoin Really Untethered,” John Griffin calls Tether an unstable coin and accuses Tether Ltd of minting tokens without being backed by Fiat currencies, as it was meant to be.
To put these allegations into perspective, we need to look at some facts –
- Around 60% of Bitcoin Transactions are done using tethers. Tether is one of the most popular ways to buy bitcoin in India and across the world.
- There has been a massive upsurge in the circulation of tethers during the last few years. From an approximate circulation of $4 billion in Tethers in January of 2020, the current value of tethers in circulation is approximately $21 billion.
- There is no publicly available audit of cash reserves, despite requests from critics.
The study notes that in the 2017 Bitcoin rally, Tether accounted for 59% of Bitcoin’s price increase and proceeds to claim that it was directly influenced after more Tether was minted and pushed into circulation. He further notes the risk of collapse of Tether due to regulatory scrutiny and the associated risks – “It’s a huge risk for the cryptocurrency space. A lot of people don’t realize how exposed they are because so many transactions occur in tethers. If you removed those tethers, it would lead to a significant crash in cryptocurrency prices. It could cut across multiple exchanges”.
However, it is important to keep in mind that these are just allegations and not proven facts. The investigation is ongoing, even delayed, causing a lot of uncertainties in the crypto world. However, Gregory Pepin, deputy CEO of Deltec Bank (Tether Ltd.’s bank) confirmed that “A reserve backs every tether, and their reserve is more than what is in circulation” on the latest episode of the “Unchained” Podcast.
At WazirX, we will continue to monitor the case closely and see if there’s any merit to the claims. As of publishing this article, we don’t find any merit to these allegations and still enable you to use USDT to buy Bitcoin in India. That being said, if you wish to trade your USDT to INR, you can feel free to do so on our platform. USDT, thanks to it being a stablecoin, remains one of the best ways to buy bitcoins in India (as evidenced by the fact that approximately 60% of all Bitcoin purchases are made using Tether). However, at WazirX, you’ll still be able to buy Bitcoins in India with INR. You can check the rates of the different pairings here –
Frequently Asked Questions
Bitcoin is the first application of the concept of "cryptocurrency," first articulated in 1998 on the cypherpunks mailing list by Wei Dai, who proposed a new form of money that relies on cryptography rather than a central authority to manage its creation and transactions. Satoshi Nakamoto published the initial Bitcoin specification and proof of concept on the cryptography mailing list in 2009. Satoshi exited the project in late 2010, with little information about himself available. Since then, the community has evolved, with numerous people working on Bitcoin. Satoshi's anonymity has sparked unfounded fears, many of which may be traced back to a misunderstanding of Bitcoin's open-source nature.
Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.
Check out the current price of Bitcoin on the WazirX exchange. Bitcoin's value is primarily determined by its supply and demand in the market. Other elements have an impact on its worth. Its intrinsic value can also be calculated by calculating the average marginal cost of producing a Bitcoin at any given time, based on the block reward, electricity price, mining hardware energy efficiency, and mining difficulty.
Bitcoin is based on the blockchain, a distributed digital ledger. As the name implies, blockchain is a connected database made up of blocks that hold information about each transaction, such as the date and time, total value, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological sequence, forming a digital chain of blocks. Blockchain is decentralized, meaning a centralized institution does not own it
The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher supply.
The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.
Bitcoin mining is not just the process of putting new Bitcoins into circulation, but it is also an essential part of the blockchain ledger's upkeep and development. It is carried out with the assistance of highly advanced computers that answer challenging computational math problems. Miners are rewarded for their efforts as auditors. They are in charge of ensuring that Bitcoin transactions are legitimate. Satoshi Nakamoto, who is the founder of Bitcoin, innovated this standard for keeping Bitcoin users ethical. Miners help to prevent the "double-spending problem" by confirming transactions.
Bitcoin mining isn't free, but it can be tried on a budget. Bitcoin mining is an essential part of the blockchain ledger's upkeep and development and the act of issuing new Bitcoins. It is accomplished by the use of cutting-edge computers that tackle complicated computational arithmetic problems. The effort of auditor miners is rewarded. They're in charge of ensuring that Bitcoin transactions go off without a fuss and that they're legal.
Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.