A simple but brilliant project, Tether is a coin that dominates its unique niche in the crypto ecosystem and serves as one of the key components that makes the current cryptocurrency market possible. It has not gotten to this position without controversy, however, and can be a very divisive topic in the crypto community as well as attracting negative attention from more mainstream media sources as well. As Tether’s health is so important to keeping the rest of the market functioning, all investors need to keep an eye out on the price changes of this important coin. With that in mind, we have put together some of our Tether price predictions for 2018.
What Are the Tether Price Predictions for 2018?
Stablecoin is Stable
Tether is the first widely adopted coin of a relatively new type of cryptocurrency – stablecoins. Stablecoins are, as their name may suggest, designed to remain stable against fiat currency external to the cryptocurrency market. Before the rise of Tether, Bitcoin was in many ways a gatekeeper to the wider cryptocurrency market. As one of the few coins that could be exchanged for fiat currency directly, it was Bitcoin that prospective investors had to purchase in order to then trade for other cryptos that they wanted to actually invest in.
This led to two problems: investment in cryptocurrency was constrained by bitcoin availability and the link between the growth of cryptocurrency markets and the growth of bitcoin. In short, it was what economists call a liquidity problem.
Tether, as well as stablecoins in general, was designed to combat this liquidity issue by effectively creating a cryptocurrency version of fiat currency. The central idea behind Tether is that it takes in one United States dollar for every Tether token that it releases. Effectively, investors can simply transfer dollars to Tether’s bank account in order to receive the equivalent number of Tether US dollar equivalents – USDT – in their wallets.
The reverse was also possible: sending one USDT to the Tether wallet would result in Tether wiring you a dollar from their fiat bank account. This easy convertibility with fiat currency has made Tether the de facto medium of exchange for most cryptocurrency trading today. Acquiring it is relatively easy and its value is known, reducing the amount of uncertainty in the market.
This structure means that making Tether price predictions requires a different kind of analysis compared to a conventional cryptocurrency altcoin. In theory, the price of a Tether should always remain at 1 USDT = $1, since that is the rate at which each is redeemable for the other. However, simply taking a look at the Tether price chart shows a fair degree of fluctuation, with the exchange rate reaching as high as $1.04 and as low as $0.98.
In general, that is a general indicator of the health of the cryptocurrency market. If USDT is trading at above one US dollar, that means that people are valuing the convertibility of the USDT at more than a dollar – as in, they expect to lose more money if they stay in the crypto market than it costs them to move their investments into fiat. On the other hand, if USDT is trading at less than a dollar, it means that the market is healthy and that investors would rather exchange their USDT tokens for cryptos that are growing in value.
However, because of the convertibility that Tether offers, the long-term price of the coin is going to stay at or near $1. Those are our Tether price predictions as well, assuming that Tether is not knocked off from its current by one of the possible events that we look at below.
While Tether is the stablecoin with the widest adoption, it is far from the only game in town now. Given how quickly the cryptocurrency market moves, getting complacent means getting quickly replaced by an up and coming rival coin. While Tether may currently have the fiat-to-crypto market all sewn up, there are several competitors waiting in the wings for it to make a fatal misstep.
Dai, instead of using a centralized repository of fiat dollars like Tether, instead uses Ethereum smart contracts to ensure the connection between the fiat currency accounts and the tokens issued. TrueUSD uses escrow accounts instead, which offers more transparency about the fiat currency held. Stably is backed by investment funding and plans to be available on multiple blockchains for greater stability and redundancy.
There are also several exchanges that are planning to roll out their own USD-convertible tokens for use on their own exchanges. Any of these solutions, or a combination of them, could undermine Tether’s current hold on the cryptocurrency market. Our Tether price predictions for that case are that Tether will continue trading at close to $1, but slightly below, with an equilibrium somewhere between $0.94 and 0$.98 depending on the market share it holds on to.
Conflicts of Interest and Issues with Audits
Tether has been relatively controversial given its near-monopoly on trading between fiat and cryptocurrencies. One of the main reasons has been the fact that it is closely linked to the major exchange using USDT for transactions: Bitfinex, as well as not guaranteeing the convertibility of Tether tokens for fiat currency. Newer issues arise from the fact that Tether has had difficulties in complying with regulations and maintaining transparency about its fiat holdings.
While initially storing their USD in an account managed by Wells Fargo, had to leave the bank due to legal issues and relocate to Puerto Rico. It also has failed to hold regular financial audits, and has ended its relationship with its accounting firm earlier this year. Most worryingly, Tether has issued large numbers of USDT tokens recently without clear confirmation that it has the required fiat currency to back them.
That this coincided with large gains for bitcoin and other cryptocurrencies has even been noticed by more mainstream media outlets that don’t usually cover crypto news. Even if everything turns out to be above-board and Tether gets its regulatory affairs in order, the fear, uncertainty, and doubt that all of this is casting over the crypto market has taken it well below its $1 benchmark, reaching as low as $0.98 over the past few days.
Our Tether price predictions remain stable for now, but investors should expect slight drops in its value should further controversies arise. If there is a serious drop in price – $0.95 or lower – there is likely to be significant knock-on effects on the price of bitcoin and other major cryptocurrencies as well.
Tether is a great idea that is crucial to the healthy functioning of the cryptocurrency markets, but its execution has been far from perfect. The concerns over its finances and recent market moves have spooked experienced and casual investors alike. Barring major new revelations, however, Tether is unlikely to deviate far from its $1 benchmark.
If the current status quo holds, Tether is likely to lose some market share to the competitors outlined above. In that case, the Tether price predictions model shows it to stabilize around $0.99 or $0.98, assuming it doesn’t lose too much market share. Investors should take note if it drops further, however, or if Tether starts experiencing further financial issues. In that case, the entire cryptocurrency market is likely to see a serious hit.