Tether price prediction: USDT stablecoin back opn track

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Stablecoins should be stable, but Tether scared people by briefly dropping to 95 cents

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Tether’s USDT token has retained its parity with the US dollar after its brief dip to 95 cents early in May 2022.

As of 08:45 BST (UTC +1) on Thursday 26 May the stablecoin was trading at £0.9989. Tether’s USDT token is designed to be pegged to the US dollar, meaning it is supposed to constantly maintain a value of $1.

Given that stablecoins are by definition, meant to be stable, tether, the world’s third-largest cryptocurrency, frightened everybody on Thursday 12 May with a sudden fall to 95 cents.

The collapse came after another dollar-pegged stablecoin, terraUSD, crashed by more than 99% the previous day. At around 06:30 BST (UTC +1) on 12 May, tether dropped below 99 cents, falling to a low of £0.9508 within two hours.

The coin had climbed back to $0.9867 within an hour and was at $0.9953 by 16:00 BST (UTC +1), after a 24-hour trading volume of more than $173bn.

By the following morning, it was worth $0.998 as it made its way back towards full parity with the US dollar and regained its peg. On the afternoon of 13 May it was worth $0.999, achingly close to matching the dollar. While it had not reached full parity by 25 May, it still remained around that level, effectively pegged. 

However, there were other concerns surrounding USDT, as its market cap shrunk from around $83bn on 6 May to $73.2bn on 23 May after it was reported by The Guardian that $10bn worth of the coin had been withdrawn since the start of the crash. On 26 May, its market cap slipped to slightly below $73.2bn, after the news that the number of wallets with $1m or more USDC had passed those with $1m or more USDT since the depegging of tether. 

The initial fall appeared to prompt Tether to announce it was performing a “chain swap”, moving across blockchains in a bid to repeg the stablecoin.

Also on 12 May, Tether CTO Paolo Ardoino reiterated that Tether would continue to honour one USDT for one dollar, tweeting: 

Tether price prediction

So is it still possible, after all that excitement, to make a tether price prediction?

Theoretically the price of USDT should never shift. Every unit that is in existence is fully backed by traditional currency that is held in reserve. The stablecoin has almost consistently managed to rank as the world’s third-largest cryptocurrency, behind bitcoin and ether. It is also the undisputed market leader when it comes to stablecoins, and is streets ahead of rivals such as gemini dollar and DAI.

In 2021 we saw the number of people investing in the coin, and tether’s overall market cap, explode. The size of tether has more than trebled since then, surging from $21bn on 1 January 2021 to more than $73bn as of 23 May 2022.

The sudden dip of 12 May is a rare wobble for the coin. On 20 January, after news of a potential Russian ban on cryptocurrencies, Tether was the only coin that withstood a market “bloodbath” that saw market leaders bitcoin, ether and solana lose billions in value. The next day, the launch of Tether’s new streamlined, mobile-compatible website saw USDT trading volume more than double, while the rest of the market continued to suffer

On 24 February, Russia started its invasion of Ukraine. The Russian central bank doubled key interest rates on the Monday, from 9.5% to 20%, as an immediate countermeasure against the rising inflation of its fiat currency. As the dollar soared, tether witnessed a spike of more than 30% over the course of five days against the Russian rouble.

From the Tether whitepaper

The blockchain’s whitepaper, Tether: Fiat currencies on the Bitcoin blockchain, states: “Common explanations for the current limited mainstream use of cryptocurrencies include volatile price swings, inadequate mass-­market understanding of the technology and insufficient ease­ of ­use for non­-technical users.

“Tether is based on the Bitcoin blockchain, the most secure and well­-tested blockchain and public ledger in existence. Tethers are fully reserved in a one-­to-­one ratio, completely independent of market forces, pricing, or liquidity constraints.”

How tether operates in the wider crypto market

So, what is the tether price prediction for 2022? And how is the tether prediction shaping up for 2025, 2030 and beyond? Well, assuming that it continues to remain popular among crypto investors, it is reasonable to say that the USDT price will still be $1.

We do need to ask how a coin whose value should not go up too much has increased its market cap over the past year. Well, USDT can offer a safe haven whenever the markets turn bearish, ensuring that crypto investors can exit their bitcoin positions without having to convert their capital back into fiat.

Supporters also believe that tether can have a powerful role when it comes to the remittances market, enabling dollars to be sent worldwide without punishing fees. Tether also contributes to liquidity across the crypto markets and plays a crucial role in the blossoming decentralised finance (DeFi) sector.

In addition, with the overall cryptocurrency market starting to rebound since recent crashes, more people are making use of tether as a way to trade their existing crypto assets for higher-priced coins. 

Tether reserves

Tether has also likely been helped to grow its market cap by the issuing of an attestation report, telling current and potential investors what was in the crypto’s reserves, as well as an explanation of the ratings and maturity of Tether’s certificates of deposit (CD) and commercial paper (CP).

As of the paper’s release on 30 July 2021, just under half the crypto’s reserves were in CP and CD, with around 93% rated A-2 and above and 1.5% below A-3. This news will have soothed the minds of traders who may have been concerned about the safety of the growing stablecoin. 

Tether’s market cap on 1 January 2021, was around $21bn. Then, in keeping with the overall growth of the cryptocurrency market at the start of last year, it grew and grew, reaching $25bn on 26 January and $30bn on 10 February. One of the key points came on 3 April 2021, when it reached $42bn.

That meant it had doubled its market cap in the space of a little over three months. The figure continued rising, hitting $50bn by the end of the month. Even the events of 19 May 2021 barely hurt tether. Its market cap went down from $58.4bn to $58.1bn from 19 May to 20 May, but it was soon back up, breaking through $60bn on 25 May. 

When tether took a break from minting new coins over June and July, the stablecoin’s cap barely moved during these months.

Market volume roller-coaster ride

Market volume went on a roller-coaster ride over the summer of 2021. On 25 July 2021, trading volume was $45.9bn, but the following day it more than doubled to $92.4bn. On 27 July, it was back down to $67.9bn and was below $50bn on 29 July before shooting back up to $58bn on 30 July and $67.3bn on 5 August. There was yet more growth and tether became the most-traded crypto in January 2022

On 28 February 2022, the market cap hovered around the $79.6bn mark, while on 6 May, it stood at a little over $83bn. In the 24 hours to 14:15 BST (UTC +1) that day, $98.4bn worth of tether was traded, making it the most traded crypto. This news came not long after the announcement that Tether was planning to reduce the amount of commercial debt in its reserves. Even during the crisis of May 2022, there was still activity, with the 24 hours to 09:50 BST (UTC +1) on 12 May seeing almost $185bn traded, with a market cap of a little over $81bn. Six hours later, at 15:50 BST (UTC +1), there had been almost $170bn traded, with a market cap of about $82.3bn.

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By 09:15 BST (UTC +1) on 13 May, once the coin had regained its peg, there had been more than 112 billion tether traded in the previous 24 hours and it had a market cap of a little below $80bn. At 15.25 BST (UTC +1), more than $103bn had been traded in the previous 24 hours and USDT enjoyed a market cap of around $78.7bn.

At around 09:45 BST (UTC +1) on 16 May, there was a 24-hour volume of $59bn, with a market cap of a little over $75.6bn. By about 08:50 BST (UTC +1) on 17 May 2022, 62,727,186,644 USDT had been traded in the previous 24 hours, and it had a market cap of about $75.6bn. By 09:00 BST (UTC +1) the following day, its 24-hour volume was $55bn and it had a market cap of $74.1bn.

In terms of market cap, the needle had barely moved by 08:00 BST (UTC +1) on 19 May, and the market volume had risen to $58.8bn. A little over 24 hours later, at around 08:30 BST (UTC +1), its market cap remained at $74.1bn, but the 24-hour volume had gone up slightly to $59.7bn. By 23 May, the market cap was down to $73.2bn, with a 24-hour volume at 09:00 BST (UTC +1) of $47.03bn. It was the largest stablecoin and the third largest crypto overall. By 08:45 BST (UTC +1) on 24 May, the market cap was roughly the same, but the volume had gone up to around $57.4bn. The market cap was basically static as of 08:35 BST (UTC +1) on 25 May, but the volume was down to about $54.3bn. By 08:30 on 26 May, the market cap had dipped to slightly below $73.2bn, and the volume had fallen further to $50.5bn.

While the volume is down overall significantly, this could easily be explained by growing wariness of crypto in general in the wake of recent events, and tether is still redeeming one USDT for $1. 

The latest figures came in the wake of the news that, in the three months to 31 March 2022, Tether Holdings had reduced the amount of commercial paper in its reserves by about 17%, from $24.2bn to $20.1bn. At the same time, the amount of money market funds and US Treasury Bills had risen by around 13% from $34.5bn to $39.2bn.

In a statement, Ardoino said that the amount of CP in the reserves had dropped by a further 20% since 1 April, adding: “Tether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honor a redemption request from any of its verified customers.

“This latest attestation further highlights that Tether is fully backed and that the composition of its reserves is strong, conservative, and liquid. As promised, it demonstrates a commitment by the company to reduce its commercial paper investments and in doing so, led to a rise in its holdings in US Treasury Bills.”

Tether is, therefore, a popular coin that is used a lot in trading. We can also see that as it becomes more popular, its market cap grows. Nevertheless, if you want some fireworks in your tether price predictions, you are probably not going to get them. If you invest $700 in USDT today, it will almost certainly be worth $700 in the years to come.

USDT’s price can fluctuate on occasion but, more often than not and despite the events of 12 May 2022, these swings are by fractions of a cent. Generally speaking, USDT manages to serve as an effective peg to the greenback, something that algorithmic stablecoins often struggle to achieve, as we have recently seen. Whether the recent drop to $0.95 is a blip is something we shall have to keep an eye on, although it does appear to be moving closer and closer to the dollar parity, which it needs to be truly effective.

Forget price predictions, look at supply

Tether’s market cap has exploded in recent months, but governments around the world are starting to explore plans to launch their own central bank digital currencies (CBDCs), with China considerably ahead of the pack in piloting its digital yuan (eCNY). 

China tested the digital currency at its Winter Olympics in Beijing. In the Olympic Village, athletes and visitors were able to make purchases with cash, a Visa card or the digital yuan.

The US has confirmed that it intends to develop a digital dollar in the coming years, but does not appear to be in a rush. Would an official alternative eat into tether’s market share?

Beyond tether price predictions: Company woes

In recent months, there have been some developments that could have undercut confidence in USDT’s price. One was a long-running legal dispute between Tether, its parent company Bitfinex, and the New York State attorney general.

This came after allegations that USDT was not fully backed by cash reserves, and that Bitfinex took a loan from the stablecoin issuer to plug an $850m gap in its finances that was triggered by the collapse of a payment processor.

Bitfinex and Tether were subsequently ordered to pay damages of $18.5m, and agreed to submit periodic updates on the state of their reserves every three months for the next two years. Both companies were also prohibited from operating in New York.

At the time, Tether said in a statement: 

“Tether and Bitfinex are pleased to have reached a settlement of legal proceedings with the New York Attorney General’s Office. Under the terms of the settlement, we admit no wrongdoing. The settlement amount we have agreed to pay to the Attorney General’s Office should be viewed as a measure of our desire to put this matter behind us and focus on our business.”

The legal drama did not end up affecting the latest tether price prediction, which firmly remains at – yes, you guessed it – $1. 

Further woes came on 15 October 2021 when the Commodity Futures Trading Commission in the United States fined Tether $41m for claiming its tokens were fully backed by fiat currencies. Bitfinex was additionally fined $1.5m. 

Meanwhile, earlier in the year, Tether was in the news at the start of March after the crypto company announced on Twitter that it had been ordered to pay a ransom of 500 BTC, or else “sensitive documents” would be released. At the time of the demand, this payment would have been worth $27.5m.

Despite an outside chance that this could affect tether (USDT) price predictions, the company stood firm and said that it was refusing to bow to the demands. Tether wrote: 

“It is unclear whether this is a basic extortion scheme like those directed at other crypto companies, or people looking to undermine tether and the crypto community as a whole. Either way, those seeking to harm tether are getting increasingly desperate.”

There have been some outlandish tether price predictions made elsewhere that suggest the crypto could be worth way over a dollar in the 12 months to come, driven by demand from institutional investors.

But the chances of such a USDT price prediction coming true are extremely slim, and although rapid growth might seem like a good thing, it could be disastrous for an asset that has built its reputation on dependably mirroring the value of $1.

It will be interesting to see whether tether’s market cap continues to grow.

Trade USDT to USD – USDT/USD chart

USDT to USD
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Low: 0.9988
High: 0.9993

FAQs

Potentially. Because it’s a stablecoin, it should keep to a value of $1, give or take a fraction of a cent. That’s the point of it – it isn’t meant to make or lose money in and of itself, but rather to be a stable store of value. This is why a USDT price prediction tends to be a fairly undramatic affair compared with other cryptocurrencies, even if the brief depegging of 12 May might have caused concern. 

That said, you need to do your own research, remember that prices can go down as well as up, and never invest more money than you can afford to lose.

Ideally, tether should be worth $1 – that is what it is intended to do. A USDT price prediction from DigitalCoinPrice suggests it will should be $1.01 in 2025, while Gov Capital has an average tether price prediction of $3.745 for 25 May 2025.

These predictions should be taken with a pinch of salt, however. One would expect that, because the USDT price is designed to be $1, its creators will do everything they can to peg the price to the dollar. Remember that forecasts are very often wrong, too.  

If you want to buy tether, you can do so at a range of exchanges, including Currency.com. Just remember to do your research and never invest more than you can afford to lose. 

Further reading

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