What is USDT for and who uses it?

USDT is a stablecoin pegged to the US dollar, used to reduce the risk of cryptocurrency investment and facilitate transactions and cross-border payments. Users include investors, traders and users who need cross-border payments.

Mar 31, 2025 at 01:54 pm

What does USDT do? Who can use it?

USDT: The purpose of stablecoins and user groups

USDT, full name Tether, is a stablecoin pegged to the US dollar. This means that 1 USDT should theoretically always be worth $1. Its main function is to provide a relatively stable store of value and trading medium in the cryptocurrency market, reducing the risks brought about by cryptocurrency price fluctuations.

The main uses of USDT:

• Reduce risks: The cryptocurrency market is volatile, and USDT, as a stablecoin, can help investors protect their assets when the market falls and avoid huge losses. You can convert high-volatility cryptocurrencies such as Bitcoin into USDT and then exchange them back after the market picks up.

• Convenient trading: Many cryptocurrency exchanges support USDT trading pairs. Using USDT for trading is more convenient and fast than directly using fiat currency trading, and the handling fee is relatively low.

• Cross-border payment: USDT can bypass the limitations of the traditional financial system and achieve faster and lower-cost cross-border payments. This is especially important for some areas that lack a sound financial infrastructure.

• Hedging: Some investors use USDT for hedging to hedge the risk of falling cryptocurrency prices.

Who will use USDT?

USDT has a wide range of user groups, including:

• Cryptocurrency Investors: This is the main user group of USDT. They use USDT to reduce investment risks, facilitate trading, and hedge operations.

• Cryptocurrency Trader: Traders frequently trade cryptocurrencies, and using USDT can improve transaction efficiency and reduce transaction costs.

• Cross-border payment users: Users who need to make cross-border payments can use USDT to bypass the restrictions of the traditional financial system and achieve more convenient payments.

• Institutional Investors: Some institutional investors have also begun to use USDT to invest and manage assets to reduce risks and improve efficiency.

• Ordinary users: Some ordinary users who are interested in the cryptocurrency market but are worried about the high risk may also choose to hold a small amount of USDT.

USDT's operating mechanism:

Tether claims that each USDT issued corresponds to a $1 reserve in their account. However, this claim has been controversial, and the transparency and authenticity of its reserves are often questioned. Understanding the risks of USDT is crucial, it is not completely without risks. Tether faces regulatory and legal challenges that could affect USDT's price stability.

Risks of using USDT:

• Price fluctuation risk: While USDT is designed to maintain a 1:1 ratio to the US dollar, there have been short-term decoupling in history, which may lead to losses.

• Regulatory risks: Governments are increasingly strict in regulation of stablecoins, which may affect the future development and use of USDT.

• Credit Risk: Tether's financial position and reserve transparency have been controversial, which poses USDT's credit risk.

• Security Risk: Like all cryptocurrencies, USDT is at risk of hacking and security breaches.

How to get USDT?

Generally speaking, you can obtain USDT through the following channels:

• Cryptocurrency Exchange: Most mainstream cryptocurrency exchanges support USDT trading pairs, you can buy USDT in other cryptocurrencies or fiat currencies.

• OTC: You can buy USDT through some OTC platforms.

• Wallet: Some cryptocurrency wallets that support USDT, allowing you to receive and store USDT.

Comparison of USDT with other stablecoins:

There are a variety of stablecoins on the market, such as USDC, BUSD, etc., which are similar to USDT and are all aimed at maintaining a stable exchange rate with the US dollar. Which stablecoin you choose depends on your risk preferences and your level of trust in different issuing institutions. Each stablecoin has its own operating mechanism, risks and advantages.

FAQ:

Q1: Is USDT safe?

A1: USDT is not absolutely safe. It faces risks such as price fluctuations, regulation, credit and security. Users need to carefully evaluate these risks and invest based on their own risk tolerance.

Q2: Will the USDT price remain at $1?

A2: In theory, USDT should always be worth $1. However, there has been a brief decoupling phenomenon in history. There is no guarantee that the price of USDT will always remain at $1.

Q3: What can USDT be used for?

A3: USDT can be used to reduce the risk of cryptocurrency investment, conduct convenient cryptocurrency transactions, and conduct cross-border payments.

Q4: What are the requirements for purchasing USDT?

A4: Generally speaking, you need a cryptocurrency exchange account and certified by KYC (Know Your Customers). Specific requirements vary by exchange.

Q5: What is the difference between USDT and USD?

A5: USDT is a cryptocurrency, while USD is fiat currency. USDT is intended to be pegged to the US dollar, but is not equivalent to the US dollar. While the price volatility of USDT is smaller than that of other cryptocurrencies, there are still risks.

Q6: What is the future development of USDT?

A6: The future development of USDT depends on whether it can continue to maintain a stable peg with the US dollar and whether it can cope with an increasingly strict regulatory environment. This is still a question of uncertainty.