Investing in cryptocurrency is a trend that has shown an astronomical rise since Bitcoin's introduction over a decade ago. Concurrently, many other cryptocurrencies have been developed and emerged in the market, each with unique features and benefits. One such cryptocurrency that has captured considerable attention is Tether, more commonly known by its digital ticker, USDT.
This comprehensive guide is geared towards beginners and will delve deep into the intricacies of investing in Tether, answering crucial questions like: how to buy Tether? Is Tether a good investment? Keep reading to get well-versed with the world of Tether.
Understanding Tether: A Behind the Scenes Look
Before we navigate towards how to buy Tether, it's essential to understand what Tether fundamentally is and how it functions in the complex, volatile world of cryptocurrencies. Tether belongs to a variety of cryptocurrency known as 'stablecoins'. Stablecoins aim to keep their market value constant, and as the name suggests, 'stable'. What sets Tether apart is that it's pegged to the US dollar, meaning every Tether coin in the ecosystem is backed by a US dollar held in reserve by Tether Limited, thus maintaining a 1-to-1 ratio.
As a result of this stabilization, Tether has emerged as a significant player in the world of cryptocurrencies. It functions as a bridge between the digital and the physical world by combining the flexibility and potential for growth of cryptocurrencies with the relative stability of fiat currency.
How to Buy Tether: A Beginner's Guide
Armed with foundational knowledge about Tether's functionality, the next logical question arises: how to buy Tether? As one of the most widely used cryptocurrencies, Tether can be purchased on various cryptocurrency exchange platforms. Binance, Huobi Global, OKEx, and Kraken are among the top platforms where you can buy and sell Tether.
While the process may slightly vary between platforms, the core steps remain quite similar for purchasing Tether. Here's a beginner-friendly, step-by-step guide:
- Create an account: The first step involves registering on your chosen cryptocurrency exchange platform. This process usually involves providing an email address or phone number for verification purposes.
- Secure your account: Once your account is created, you'll want to ensure it's secure. Using a unique, strong password and enabling two-factor authentication (2FA) can help safeguard your newly created account.
In our previous sections, we covered an introduction to Tether and how it functions as a stablecoin. Moving on, we will now focus on the rudiments of investing in Tether and the potential benefits and risks involved.
The Importance of due diligence
Investing in any form of cryptocurrency requires a significant investment of time and energy. Before investing in Tether, or any other cryptocurrency, it is crucial to perform due diligence. Understand the market trends, the volatility of the crypto market, and the specifics of the coin in question. Having a deep understanding of these factors will greatly enhance your ability to make informed investment decisions.
Tether offers the benefit of stability in a highly volatile market. It reduces the risks associated with the unpredictable ups and downs of cryptocurrencies. Due to its 1:1 backing with the US dollar, it is an appealing choice for investors who want exposure to the cryptocurrency market without the same level of risk. However, like all investments, investing in Tether is not without risks. The key is to diversify your investments.
How to Buy Tether
Buying Tether is a straightforward process. First, you must set up a digital wallet where you can store your Tether. Wallets such as MyEtherWallet, Exodus, and Trezor are compatible with Tether. The wallet provided by the exchange you purchase on is also an option.
Choose a reliable exchange that trades in Tether. Some popular exchanges include Binance, Kraken, and Bitfinex. Once you've selected an exchange, create an account and provide any necessary verification information. After completing these steps, you'll be able to purchase Tether with either other cryptocurrencies or fiat currency, depending on the exchange.
Risk and Considerations
While investing in Tether does bear its advantages, like any investment, it also carries potential risks. Though Tether is a stablecoin, its value is directly tied to the value of the US dollar. Therefore, any significant event affecting the dollar value may have a direct impact on Tether. This risk should be weighed carefully before deciding to invest.
Furthermore, there have been concerns over the years about Tether's claim of being backed 1:1 by the US dollar. Overcoming these concerns requires transparency, which until recently was lacking from Tether. Nevertheless, Tether published an attestation in 2021 confirming that its reserves fully backed its tokens.
Expected Returns
Tether's inherent value doesn't appreciate over time like typical stocks or volatile cryptocurrencies. Hence, don't expect high returns from holding Tether itself. Yet, it plays a crucial role as a stable digital asset allowing investors to hedge against market volatility. Hence, the return on investment (ROI) in Tether is generally seen in the form of preserving the value of one's portfolio during market downturns and providing liquidity for quick trades.
Conclusion
Investing in Tether can act as a safe haven while diving into the more volatile world of cryptocurrency investments. As with all financial decisions, you should consider your individual financial position, risk tolerance, and investment goals in conjunction with carefully researched market knowledge before proceeding.