In the digital currency market, due to policy restrictions, most exchanges do not support direct transactions between fiat currencies and digital currencies, and the over-the-counter transaction process is cumbersome and high-priced, so USDT has become a connector for fiat currencies and digital currencies as usdt to usd exchange rate is 1:1.
However the USDT has always been controversial for a long time, particularly over the controvercy of “over-issued” and ” the lack of dollar reserves”.While Tether seems to have not been effected by those disputes. Since its release in 2015, USDT has been over-issued for 104 times in total, most of which are concentrated after September 2017. And since the beginning of this year, the USDT has been issued for 14 times, with a total number of 1.71 billion, accounting for 56.6% of the current total.
Due to the relatively stable price, when the market fluctuates, many investors will convert the digital currency into USDT for value preservation, they view USDT as a safe haven. Therefore, many investors, especially those who have just entered the community, can easily think that the USDT and the US dollar equal, they believe that the usdt to usd exchange rate will remain at 1:1 in any case.
But in fact, USDT is essentially a token. When the capital flow is large, the USDT will also have a premium or depreciation. For example, in January of this year, Bitcoin fell sharply. The currency holders exchanged a large amount of digital currency into USDT for risk aversion, which led to tighter supply of USDT. The over-the-counter premium rose and the premium reached 19.7%.
That is to say, usdt price can not always remains at 1 US dollars at any times. It is not 100% safe as a value-kept cryptocurrency. However, compared to similar products, such as TrueUSD, DAI, usdt’s status is still difficult to shake.