Trading in cryptocurrencies offers both profits from trade and exposure to volatility. To overcome this volatility, traders consider converting their cryptocurrency profits to fiat, by selling cryptocurrencies in crypto-fiat markets. The USD Tether is one cryptocurrency that offers a better hedge against inflation than the USD. This has emerged as a stablecoin of note, and despite arguments against it being backed by USD and its reserves, Tether continues to remain largely popular and mainstream across exchanges. Tether affords both retail and institutional traders more privacy, transparency, and reduced costs for cross-border transactions.
Stablecoin, just as the name suggests, is tied to assets like fiat currency like the USD. The price of this cryptocurrency is tethered to fiat and that allows users to hedge against other cryptocurrencies that are relatively far more volatile.
Here are the top factors that make Tether a better hedge against inflation than the US dollar
Tether (USDT) stablecoin is a cryptocurrency that is backed by the United States Dollar unlike other cryptocurrencies like Bitcoin, Ethereum, XRP, Litecoin, and Dogecoin. The cryptocurrency is available for trade on several digital exchanges and its “stable” nature ensures a form of digital cash, for easy transfer and receipt worldwide.
Here are some factors that make Tether a better hedge against inflation than the US dollar:
1. Stability and low volatility
Stablecoins like Tether are largely stable in their value because the value is pegged to the USD. It could also be connected to other fiat currencies, in the case of DAI and other fiat currencies. This provides traders stability in terms of the value of their investment despite trading cryptocurrencies. They ensure that the investment in currency today is not diminished in value tomorrow, drastically.
2. Replaces fiat on a cryptocurrency exchange
Among other cryptocurrencies, stablecoins fit in seamlessly with the use case of fiat currencies on exchanges. It is easier to store profits and cryptocurrencies in terms of USDT, hedge against inflation, and move cryptocurrencies across exchanges. The lack of volatility lends more credibility to the usage of cryptocurrency exchanges.
3. Better store of value
Retail traders face fiat currency inflation in their countries and they may find it difficult to exchange fiat for USD. Instead, exchanging it for USDT is easier and a better hedge against volatility. Stablecoins provide protection against inflation, volatility and provide a secure store of value for retail traders. Anyone can sign up on a cryptocurrency exchange and buy USDT to get started and hedge against volatility.
4. Broadens access to US Dollars worldwide!
Since some Stablecoins are connected to USD value, they provide people from other countries bearing volatile currencies with a safety net with seamless access to their assets when required. Traders in developing countries can rely on the stability of these stablecoins. USD Tether for instance is backed on a 1:1 ratio with Dollar value and hence treated as one dollar. Hedging stablecoins like Tether hence is a safer bet than others.
5. Technology
USDT is testimony to battle-tested technology having witnessed multiple market cycles and resisted extreme market volatility with measurable success. Also, institutional, and corporate usage has led to widespread recognition for USDT as a stablecoin, among investors that render the currency an intuitive store of value. Its presence in e-commerce and low transaction fees are some of the other benefits of using USDT. To buy USDT with a fiat currency of your choice, sign up on eBankX and get started.
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