Tether Limited has announced that it has re-enabled direct redemption of its native token USDT for US dollars through its own wallet. It expects this to help stabilize the price of USDT after two months of volatility. This announcement is due to the new banking relationship between Tether Limited and Deltec Bank in the Bahamas.
Tether (USDT) is currently the top stablecoin with a market cap in excess of USD 1.8 billion and has the 7th highest cryptocurrency market cap overall.
Throughout most of 2018, the price of USDT was stable at parity with the USD, an optimal condition for a stablecoin. However, in early October 2018, USDT became unpegged from the USD and slid lower after severing ties with the Noble Bank of Puerto Rico. The average price of USDT across all cryptocurrency exchanges briefly dipped as low as USD 0.925 due to fears of insolvency. Since then, Tether has remained below parity with the USD and has been quite volatile. In this period, the circulating supply of USDT shrank from 2.8 billion to as low as 1.7 billion, indicating USD 1.1 billion of the tokens being redeemed.
Currently, USDT is hovering above USD 0.98 and continues to be volatile but the restoration of the direct USD redemption service should restore stability. There will be many companies and exchanges where USDT users can redeem and high volume traders could even redeem individually, which should restore the global arbitrage mechanism that previously kept USDT’s price stabilized. It will take some time for this to go into effect since users have to go through a verification process for redemption.
Soon, users will be able to acquire USDT through the Tether wallet as well for a minimum trade of USD 100,000. Withdrawal fees may cause USDT’s price to stabilize slightly below parity in the long term. That being said, Tether volatility should dissipate after this move.
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