Efficient Frontier
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Efficient Frontier

King Tether: 39% Of Cryptocurrency Exchanges Carry USDT

The Cryptocurrency universe was abuzz this week yet again with chatter and speculation about the solidity of the Tether currency.

It is interesting to note that the word “tether” (as a noun) once was in common English usage meaning “a rope or chain with which an animal is tied to restrict its movement. Today “Tether,” with a capital “T” is a unit of account token which is used as a “virtual dollar” across many cryptocrurency exchanges. Every digital Tether token should be worth 1 USD, but instead of a regular dollar, the bookkeeping is all managed on the Bitcoin blockchain, making it convenient to use inside the cryptocurrency ecosystem.

Many of the top exchanges these days use Tethers instead of dollars, and I was curious to see how deeply entrenched the Tether Dollar is in today’s cryptocurrency markets, and compare it to the cryptocurrency markets’ dependence on the traditional banking system — and its “old fashion” dollars.

Checking every cryptocurrency exchange was not an easy task (We checked 158 exchanges!) because not all exchanges post their Tether listings on sites like CoinMarketCap — but we persisted and found some interesting results on the market as a whole:

39% of the exchanges use Tethers

2.5% allow trading crypto-coins against regular (USD) dollars as well as Tether

18% of the cryptocurrency exchanges are using traditional bank based US Dollars

Only 4.5% of the exchanges are based purely on Bitcoin

Other exchanges are either basing their markets on other national currencies (the Turkish Lira, the Korean Won and of course, the Chinese Yuan are the stars in this category) or individual cryptocurrency centric exchange (for example, EtherDelta which allows decentralized trading of ERC-20 tokens against Ethereum).

Conclusion:
The use of Tether seems to be prevalent, with newer exchanges (possibly following the crypto-coin trading craze of 2017) commonly preferring to use the Blockchain-friendly USDT instead of creating banking relationships needed for bank dollars.

But in truth, this current Tether system only simplifies the problem: Tether still needs to maintain a bank account, containing one USD for each USDT token it creates . This bank account could contain more than 2 billion dollars, making it possibly the largest account in the world, and Tether’s banking troubles were one of the things that prompted this latest scare.

It is now rumored that Tether has found a new bank, located somewhere on an exotic Island, willing to accept its business, and at this time companies and startups are racing to create Tether’s successor.

But even Tether’s biggest critics have to acknowledge how deeply rooted Tethers are in the current cryptocurrency trading universe.

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