Crypto's little devil on your shoulder
Anyone here familiar with Tethers? (USDT)? They're a token that is paired to and backed by the US Dollar, so that for every Tether that exists, there also exists 1USD to back it up.
I'm sure a number of us are familiar with the controversy regarding the USDT that's come to light ever since Bitcoin went to the moon, and that this will be a major scandal for Bitfinex and for cryptocurrencies in general, especially with regards to mainstream adoption, but it's not really what I want to write about today.
I actually support the existence of the USDT. I believe they're actually an extremely useful tool when used properly. It's just that they're picking up a bad rep because of the way they're currently being used by some notable exchanges.
Secure your profits
I used Tethers to lock in my profits up high. It's the equivalent of selling to fiat when the prices are up and securing them in before a correction. Moving into USDT carry a few advantages over selling into fiat itself:
- Transactions occur instantly
- No need to pay withdrawal fees (on Bittrex at least)
- You can buy into alts using the USD value of the coin instead of the sat price
They also carry some critical disadvantages:
- You can't buy anything else with them. If you want to turn them into something of value, you must go back into Bitcoin, back the way you came
- They are Tethers, which are mired in controversy and there is the danger that exchanges could cease trading of USDT pairs once the heat gets too high
That second disadvantage is enough to make me very hesitant to use Tethers in the first place.
So far, Tethers have been quite good, but it takes a bit of learning in order to trade them properly. For example, on Bittrex, the BTCUSDT pairing lags behind the Bitfinex spot price, and it always trades lower than the Bittrex index price, which means you can sometimes be getting a bad deal. You need to time the execution of your trades and make sure you have an exit plan to get back in. You never want to be holding Tethers for too long because they are simply placeholder tokens that carry no intrinsic value of their own and have very limited trading opportunities.