Is the USDT reliable as a safe-haven cryptocurrency?

What is Tether? Tether company defines Tether in the "Tether White Paper: A Legal Currency Token Using Bitcoin Blockchain Transactions" as: Tether USD (USDT),is a digital currency linked to fiat currency. All Tethers are first issued on behalf of the Bitcoin blockchain via the Omni Layer protocol. Each issued Tethers is linked to the US dollar one-to-one, corresponding to the US dollar. The total amount is stored in Hong Kong Tether Co., Ltd. “

 

1.Features of the USDT: 1:1 reserve guarantee

According to Tether's CTO and co-founder Craig Sellars, users can wire the US dollar to the bank account provided by Tether through SWIFT, or exchange the USDT through the exchange. Tether's website claims to strictly adhere to the 1:1 reserve guarantee, which means that for every USDT token issued, its bank account will have a $1 guarantee.

This is the biggest feature of the USDT, which is equivalent to the same amount of US dollars, 1 USDT = 1 USD, making it a good hedging cryptocurrency in the volatile crypto market.

 

2.Advantages of USDT

2.1 Avoiding overall downside risks

The USDT will not show huge fluctuations in the ups and downs (which can be seen from the following tether chart), only change with the fluctuations in the US dollar exchange rate, and the price is very stable, so its most important significance is to hedge.

(source from: citicoins.com)

 
In the case of all currency prices falling in the currency transaction, the risk can be avoided by converting the digital asset to USDT. For example, if you buy BTC, when BTC plunges, we can immediately exchange the currency for USDT, so that your assets will not shrink.

2.2 Making the price of the currency more intuitive

In currency transactions, it is often impossible to visually see the corresponding value of each currency. For example, the price of the ETH/BTC transaction pair is 0.0485BTC. What is the value of the ETH's legal currency? Generally, everyone can only use the calculator to calculate it, which is very inconvenient. But in the case of supporting USDT trading pairs, you can visually see how much US dollars each currency is worth.

 
2.3 Fast circulation

The circulation of the USDT is based on the Bitcoin blockchain and is stable and reliable.

 

3.The risk of USDT

Tether is a decentralized digital currency, but not a perfect decentralized company, tether stores all assets as a centralized pledge, so USDT has the following risks:

3.1Tether company may go bankrupt;

3.2The bank in which the company opens an account may go bankrupt;

3.3Banks may freeze funds;

3.4The company may roll the money;

3.5Centralized risk may make the entire system paralyzed

 

4.In which case will USDT collapse?

According to the current international standard of the banking industry - the Basel Accord, the core tier 1 capital should be above 8%,, which means that the 2.25 billion USDT requires at least $180 million in margin to ensure that there is no risk of runs on 99.9%. However, whether the  special margin used by Tether company to support USDT is no more than 180 million US dollars or not, no one can guarantee it unless the audited financial report is taken out.

 
It can be seen that the USDT which is issued by Tether, with its own centralized attributes, and there are still many potential risks.