USDT is a stablecoin: a crypto-asset built to always be worth roughly 1 US dollar, not to grow in price.
The idea behind it
Bitcoin and Ethereum have prices that form freely, from supply and demand, so they can rise or fall a lot in a single day. A stablecoin aims for the opposite: staying pegged to the value of a reference asset, almost always the US dollar. A USDT should always be worth close to 1 USD, regardless of what bitcoin’s price does that same day.
How the price stays near 1 dollar
The issuer claims that, for every USDT in circulation, it holds equivalent reserves in dollars or assets easily converted to dollars (cash, short-term government bonds). Whoever holds USDT can, in theory, redeem it for dollars from the issuer. That redemption right is what keeps the price near 1 dollar: if USDT started trading below 1 dollar on a platform, it would become profitable to buy it cheap and redeem it at face value, which pushes the price back up. The mechanism works as long as the reserves genuinely exist and redemption actually happens.
Who issues USDT
Unlike Bitcoin, which has no central issuer, USDT is issued by a private company, Tether. The company decides how many units exist, holds the reserves, and controls the issuance and redemption process. That makes USDT a custodial asset at the issuance level: the trust isn’t placed in code and thousands of independent nodes, like with Bitcoin, but in a company managing its reserves properly and reporting honestly what it holds.
What can go wrong
A stablecoin can lose its peg to 1 dollar if the market doubts the reserves are sufficient or real, if the issuer runs into operational or legal trouble, or if too many holders want to redeem at once and the process can’t keep up. Episodes like this have happened, with USDT and other stablecoins, usually for short periods, with a later return to 1 dollar. There’s no guarantee a stablecoin can’t break its peg for good. The crypto-assets law treats stablecoins as a separate category, with stricter reserve and transparency requirements than other crypto-assets; we cover that in the law guide.
Why it matters to you
On trading platforms, USDT often works as a dollar substitute: you use it to move temporarily out of bitcoin or other crypto-assets into something stable, without actually withdrawing to lei or dollars off the platform. It’s useful for speed and for trading pairs, but it isn’t a place for money to grow in value, and holding it means trusting a private issuer, not just code.
What to remember
- USDT is built to stay worth roughly 1 dollar, unlike Bitcoin or Ethereum, whose prices form freely on the market.
- The price stays near 1 dollar through reserves and the right to redeem at the issuer, not through a decentralized mechanism.
- USDT is issued by a private company (Tether): trust depends on how it manages its reserves, not just on the network’s code.