It’s kind of weird to write about Tether today because it’s a coin with one job. The Tether price is never supposed to be anything but $1. Tether is meant to be an island of price stability amidst the turbulent seas of the cryptocurrency markets. It’s a place for crypto traders to store value in the event of a market crash. With a price that never changes, USDT holdings can be brought back into other kinds of cryptocurrency at a moment’s notice, or cashed out for fiat money like USD or EUR.
But this isn’t all there is to Tether’s story. Because of some seriously shady dealings from Tether’s creators, the very foundation of the original stable coin is seriously questionable. So what does this mean for USDT prices? Well, our Tether price prediction, probably more than any other prediction we’ve made, is fundamentally uncertain, and very much all or nothing. Either Tether prices will be right around $1 forever, or Tether prices will fall like a rock to $0.
Why Tether USDT Prices Rise and Fall
Tether prices fluctuate ever so slightly because of the way crypto markets work. When there is a whole lot of supply on a cryptocurrency exchange like Bitfinex, for example, traders will accept a little less for the coins they’re trying to sell, just to get a trade completed and free up that money for other purposes. In the event that not very much of a coin is available, people will be willing to pay more for it, because no matter what the Tether value is, they want and need it now.
This is all pretty basic supply and demand economics, but it’s interesting that we see it apply to a supposed “stable coin” – a cryptocurrency that’s never supposed to be anything but $1. This highlights one of the problems associated with Tether. Even though it’s supposed to be pegged to USD, there’s nothing built into its technology that holds the Tether price in place. Tether prices are stable because traders tacitly agree that no one will ever pay very much above or below $1 for a single Tether coin.
Supply and demand isn’t the only factor related to Tether prices. At several times in its history, investors have been very suspicious about Tether. We’ll get deeper into these suspicions in the next section. But suffice to say, Tether is only worth $1 if everyone agrees that it’s a good product. This has been called into serious question in months past, and the Tether situation remains far from resolved today, even though Tether worth remain stable at or around $1 USD.
Tether Historical Prices
Looking at a historical Tether price chart is like watching a heart monitor flatline. But unlike a real flatline which would indicate death, the lack of volatility in Tether’s chart means that the stable coin is very much alive. However, when we look back to May 2017, we see that Tether dropped to $0.91, before quickly bouncing back above and beyond $1 to a maximum price of $1.02. Didn’t we say that Tether prices are never supposed to change? What was going on back in 2017?
Tether’s past volatility is the result of big gaps between the promises of the companies that owned Tether (like cryptocurrency exchange Bitfinex) and reality. From the very start, Tether was supposed to be a stable cryptocurrency backed by reserves of real US Dollars. This was to be the foundation of its stable value. If you had a USDT, it was just a digital version of USD, totally interchangeable. It was the perfect bridge between fiat money and crypto…just as long as those cash reserves actually existed. The problem was (and is), Tether has never actually been audited.
That’s a big problem in itself, but not one insurmountable. Many people thought that Tether might actually be run like a bank, using “fractional reserve” practices. No bank keeps all of its money on hand at once. It’s leant out, invested, doing all kinds of work that only money can do. Banks keep just a “fractional reserve” of their total deposited balances. This is enough to lend out to clients on the average trading day. Banks work fine this way, and Tether (it was thought) might too. The only problem was that Tether promised it did not operate like a traditional bank.
The other major problem with Tether was far more significant. Crypto investors started to notice that fresh “newly minted” Tether started to be added to the Tether circulating supply all at once. On many days, millions and millions of new Tether would be introduced. Nobody believed that Tether was bringing in an equivalent amount of USD, so it seemed like these USDT were a kind of digital counterfeit.
But what’s the point of creating counterfeit Tether? Well, it would seem that, like all other kinds of counterfeit money, un-backed USDT could be spent on stuff, even though it wasn’t worth anything. People noticed that on the same days that Tether was printed, the price of Bitcoin would go up. This was in the heat of the 2017 Bitcoin bull run. Bitcoin might gain thousands in value in a single day, and on that same day, millions in fresh Tether would have appeared.
What was happening (and this has been verified by authorities) is that non-collateralized Tether was being created out of thin air, then used to buy Bitcoin at ever-higher prices. People behind the scheme had a lot of Bitcoin BTC (the Bitfinex Bitcoin exchange was a major player in this scandal, remember, as was crypto-crook Brock Pierce), and they would sell it at these inflated prices. A lot of people got rich in this scheme, and it created a massive bubble, the pop from which the crypto markets have yet to recover.
And yet, Tether’s price remains stable today. Tether basically is having a sustained staring contest with the crypto marketplace. As long as Tether doesn’t blink (doesn’t submit to a real audit, or admit that it’s not backed by real USD), people can go on trading it as if it’s collateralized. However, this situation might not last forever.
Tether Future Price Predictions
Tether Prices in 2019
Tether seems to be at a low point in terms of negative market attention. This means that Tether prices are probably not going to crash. However, a number of Tether alternatives (like DAO, DAI, and Gemini Dollar) are starting to enter the market. Each one has a more complex, yet more transparent, process by which price stability is ensured. We don’t expect any of these stable coins alternatives to take over where Tether left off this year, but we would be surprised if Tether remains the king of the stable coins indefinitely. By year’s end, Tether prices will be at…
$1 per USDT.
Tether Prices in 2020
We expect crypto market prices to recover sometime this year or the next. When a full market recovery happens, it will involve all of the retail investors of the past, but also institutional investors who require highly credible fintech products from the blockchain space. Tether’s sketchy market practices will make it a non-contender, and investors will move to alternative stable coins, like the ones from Digix, Maker, or Gemini. Tether prices by the end of 2020 will be…
$0.00 per USDT.
Tether Prices in 2021 and Beyond
My 2021, we really hope that Tether is a distant memory, and that stable coins built with real integrity are meeting the needs of tomorrow’s crypto investors. Tether prices by the end of 2021 (we certainly hope) will be…
$0.00 per USDT.
Tether is one of the most interesting stories in crypto, and we don’t have nearly the space here to do this story justice. Someday, you might even be able to make a movie about the machinations and deception that undergirded Tether’s rise to the top of the crypto markets. It’s a sketchy project that still commands respect today, but we don’t think this will last forever.
Inspired by the promise of Tether, and the real need for price-stable cryptocurrencies, there are a number of high quality stable coin projects vying for the top spot. When crypto investors start to re-enter the space, they’ll be looking for a safe place to store value, without having to cash out into fiat. Some of them may choose Tether, but we don’t think this will be enough to keep USDT from tumbling to $0.00, where it deserves to be.