Prepared for : Top-tier Venture Capital & Family Office Investors

Project: Tether (Token: USDT) – Stablecoin for Financial Stability and Liquidity in the Cryptocurrency Market

Date: March 24, 2025

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1. Executive Summary

Tether (USDT) is the world’s leading stablecoin – a cryptocurrency pegged 1:1 to the US dollar – and it plays a foundational role in the crypto ecosystem (What is Tether? The Leader in Stablecoins). Launched in 2014 (originally as “Realcoin”) by Tether Limited, USDT was created to provide a stable digital dollar that avoids the wild price swings of Bitcoin and other cryptocurrencies. Over the past decade, Tether has become a critical piece of crypto market infrastructure: as of early 2025 it is the largest stablecoin by market capitalization and the most traded cryptocurrency by volume, often even surpassing Bitcoin’s daily turnover (Exploring the Tether Controversy: A Comprehensive History of Stablecoins in Cryptocurrency - BlockApps Inc.) (Tether (cryptocurrency) - Wikipedia). USDT’s raison d'être is simple – each token is meant to be backed by one real U.S. dollar in reserve, giving traders and investors a safe harbor asset that retains a stable $1.00 value.

Dominance and Market Growth: Tether’s growth trajectory underscores its dominance. By 2019, USDT had already overtaken Bitcoin as the most traded crypto asset globally (Tether (cryptocurrency) - Wikipedia). Its market capitalization has expanded from under $10 billion in early 2020 to over $100 billion by 2024 (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). In March 2024, Tether surpassed $100 billion USDT in circulation, cementing its status as the third-largest cryptocurrency behind only Bitcoin and Ether (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). This milestone highlights how indispensable USDT has become: over $122.5 billion of USDT traded hands in a single 24-hour period, reflecting liquidity that dwarfs even major fiat currency markets (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters) (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). Such volume means USDT is deeply embedded in crypto trading pairs and exchanges worldwide – indeed, a majority of cryptocurrency pairs are denominated in Tether as the base currency (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). USDT’s market cap dominance in the stablecoin sector stood around 70% as of mid-2024 (State of Stablecoins: 2024), far ahead of competitors like USD Coin (USDC) or Dai (DAI). For perspective: USDT’s market value ($114B in Aug 2024) was more than three times that of the next-largest stablecoin USDC ($33B) (State of Stablecoins: 2024). This outsized share illustrates Tether’s network effect – liquidity begets liquidity, drawing more users and integrations.

Purpose and Use Cases: Tether was designed to bridge the gap between fiat currency and crypto markets (What is Tether? The Leader in Stablecoins). In practice, it functions as a digital proxy for the U.S. dollar on blockchain rails. Traders use USDT to park value without exiting crypto during volatile swings, and to rapidly move funds between exchanges or into different cryptocurrencies without relying on slow bank transfers (Tether's $100 billion stokes stablecoin stability concerns | Reuters). For example, a trader can sell Bitcoin into USDT (instead of cash) to lock in gains, then later deploy that USDT to buy another asset – all within minutes and on-chain. This utility as a stable, always-on form of cash has made USDT integral to crypto trading strategies and exchange operations (What is Tether? The Leader in Stablecoins) (What is Tether? The Leader in Stablecoins). Beyond trading, Tether has seen explosive adoption in global payments and remittances. It offers low fees and near-instant settlement compared to traditional bank wires, which makes it attractive for cross-border transactions (What is Tether? The Leader in Stablecoins). In emerging markets from Turkey to Argentina, many individuals now use USDT as an alternative to the local currency or even to physical dollars, leveraging it for savings and day-to-day commerce in an inflation-resistant form (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters) (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters). Tether’s CEO recently noted that USDT has evolved from a tool “for pure cryptocurrency trading to being basically the most used digital dollar in the world,” with emerging markets accounting for almost the entire user base (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters) (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters). This underscores Tether’s growing role beyond crypto circles – it is increasingly a global dollar liquidity layer, providing dollar access to millions who face currency instability or limited banking.

Key Historical Milestones: Since its inception, Tether’s journey has included pivotal moments that shaped its prominence. It was co-founded by crypto entrepreneurs (including Brock Pierce and Reeve Collins) and launched in 2014, making it one of the first stablecoins (Exploring the Tether Controversy: A Comprehensive History of Stablecoins in Cryptocurrency - BlockApps Inc.). By 2017, demand for USDT surged when Chinese exchanges turned to Tether as a substitute after China’s fiat-to-crypto ban – this was an early validation of its utility. Through 2018-2019, USDT’s circulating supply grew into the billions as it became the default quote currency on major exchanges. However, this growth came with controversies (discussed later) around whether all those tokens were truly backed by dollars, a question that sparked investigations. In 2020-2021, Tether rode the crypto bull market to new heights: its market cap climbed from ~$4B in early 2020 to over $60B by March 2021 (State of Stablecoins: 2024). It weathered legal challenges by reaching a settlement with the New York Attorney General in 2021, and later that year paid fines to U.S. regulators, after which it began publishing regular reserve reports. Tether hit an all-time high market cap above $80B in 2022, before a brief dip during the Terra-UST stablecoin collapse and broader crypto downturn. Notably, USDT did not break its peg significantly during those crises – even when another stablecoin (UST) imploded, Tether managed heavy redemptions and maintained stability around $1, helping reinforce market confidence. By 2023-2024, Tether rebounded strongly, crossing the $100B mark as mentioned, and even approaching $140B by early 2025 amid renewed crypto market enthusiasm (10 stablecoin issuers approved under EU’s MiCA — Tether is left out). Today, USDT stands as a cornerstone of the crypto economy, with a market value larger than many major banks’ deposits and a decade-long track record that, despite challenges, shows a pattern of resilience and immense market trust.

Significance in Global Crypto Trading: It is difficult to overstate Tether’s importance in daily crypto market operations. Liquidity: USDT offers deep liquidity on virtually every exchange and blockchain, making it the de facto unit of account for traders. On any given day, Tether’s trading volumes are at the very top of all cryptocurrencies – often tens of billions of dollars in turnover, and on peak days exceeding $100B (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). This high velocity usage means tighter bid-ask spreads and efficient price discovery for crypto assets when paired against USDT. Market Accessibility: Tether also democratizes access to USD liquidity. Anyone with an internet connection can hold or send USDT, which is crucial for participants in countries with restricted banking. For instance, Argentine users trade ARS/USDT as a proxy for dollar exchange in a country with capital controls (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters). Stablecoin as “crypto cash”: In decentralized finance (DeFi), USDT is widely used as a stable form of collateral and as a medium in lending, yield farming, and payments. It enables smart contracts to transact in a stable unit, further ingraining it in the infrastructure of Web3.

In summary, Tether’s executive profile is that of a highly liquid, widely adopted digital dollar that has become essential for crypto-market functioning. Its dominance as the leading stablecoin is a product of network effects and first-mover advantage, but also the real utility it provides across trading, hedging, and payments (What is Tether? The Leader in Stablecoins) (Tether's $100 billion stokes stablecoin stability concerns | Reuters). However, Tether’s path has not been without controversies and risks. The following sections will delve into the key investment highlights of USDT, as well as the risks and challenges investors should weigh, the opportunities on the horizon, and practical guidance on how to use Tether in a portfolio. Overall, a nuanced analysis reveals Tether’s critical strengths – massive liquidity, global usage, integration in crypto markets – while also addressing the transparency and regulatory questions that have shadowed it. This comprehensive report aims to equip sophisticated investors with a clear-eyed view of USDT’s role and outlook in the ever-evolving crypto landscape.

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2. Key Investment Highlights

Unmatched Liquidity and Market Influence: Tether’s foremost value proposition is its deep liquidity. USDT is ubiquitous across centralized exchanges (CEXs) and decentralized platforms alike, ensuring that large trades can be executed with minimal slippage. It consistently ranks at the very top of trading volume among all cryptocurrencies – for example, in a single day it processed about $79.9 billion in 24-hour volume, surpassing the combined volume of Bitcoin and Ethereum (Exploring the Tether Controversy: A Comprehensive History of Stablecoins in Cryptocurrency - BlockApps Inc.). Such liquidity means investors can enter or exit positions in USDT quickly without materially moving its price. Even during market stress, USDT’s ample trading activity provides a buffer against extreme volatility. Market influence comes from this liquidity: Tether is so entwined with crypto trading that its stability underpins the entire market’s stability. As CoinShares research head James Butterfill noted, Tether’s dominance means if it were to fail, trading volumes would see a dramatic decline, impacting asset prices across the board (Tether's $100 billion stokes stablecoin stability concerns | Reuters). On the positive side, Tether’s reliability through numerous volatility events (2017 ICO boom, 2018 crash, 2020 COVID shock, 2022 deleveraging, etc.) has reinforced trust that it can handle stress (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters). The fact that “a majority of cryptocurrency pairs are denominated in Tether’s stablecoin” (Stablecoin Tether exceeds $100 bln tokens in circulation | Reuters) speaks to how integrated USDT is in market structure – it is the grease that keeps the crypto machine running smoothly. For investors, this means holding USDT is akin to holding a universally accepted, high-liquidity asset, one that can be readily swapped for any other crypto or fiat almost anytime, anywhere.

Widespread Adoption and Network Effects: Tether enjoys a powerful network effect from being the first and most widely adopted stablecoin. It is supported on 14+ blockchains (Ethereum ERC-20, Tron TRC-20, Binance Smart Chain, Solana, etc.), making it highly interoperable (Tether (cryptocurrency) - Wikipedia). Wherever there’s a crypto ecosystem, USDT has likely been bridged to it. This omnipresence has made USDT the stablecoin of choice for millions of users worldwide. As of mid-2024, Tether reported over 350 million addresses (users) globally holding its stablecoins (Tether (cryptocurrency) - Wikipedia) – a staggering figure that likely surpasses the user base of many traditional FinTech apps. This global footprint is especially pronounced in regions with unstable local currencies or limited USD access. Tether’s management notes that “almost the entire user base is in emerging markets” like Turkey, Vietnam, Brazil, Argentina, and various African countries (Stablecoin Tether gets boost as dollar alternative in emerging markets, CEO says | Reuters). In these places, USDT serves as a lifeline to dollar stability – citizens can hold savings in USDT to protect against local currency inflation or devaluation, and transact globally in USD terms. The more people use Tether, the more useful it becomes to new users (since liquidity and acceptance grows), thus reinforcing a virtuous cycle of adoption. Market dominance also feeds this cycle: exchanges list USDT pairs because that’s where liquidity is; traders use USDT because all exchanges support it – a self-reinforcing loop that competing stablecoins have struggled to break. Even when credible alternatives like USDC (by Circle) or BUSD (by Binance/Paxos) entered the market, Tether retained a lion’s share of the pie. As of August 2024, USDT alone accounted for about 70.3% of all stablecoin market cap (State of Stablecoins: 2024). Its nearest rival, USDC, had around 20% share, and others like DAI or BUSD were in the low single digits (State of Stablecoins: 2024). This dominance not only underscores user trust in Tether, but also gives it pricing power (USDT generally trades very close to $1 with tight spreads because of high confidence in its redeemability).

Stablecoin of Choice for Traders: Within the cryptocurrency trading community, USDT is regarded as the de facto “crypto-dollar.” It is widely used as a trading pair and base currency on exchanges (What is Tether? The Leader in Stablecoins). Virtually every crypto asset can be traded against USDT, from majors like BTC/USDT and ETH/USDT to obscure altcoins – providing a stable unit of account. Traders prefer using stablecoins like USDT over actual USD for several reasons: (1) Speed and availability: USDT transfers settle in minutes on blockchain networks, enabling quick rebalancing between exchanges or wallets, whereas fiat wires can take days and don’t operate 24/7. (2) No banking hurdles: Many crypto exchanges, especially offshore ones, cannot handle USD directly due to regulations or lack of banking partners. USDT fills this gap by acting as the dollar substitute within the crypto-only realm (Tether's $100 billion stokes stablecoin stability concerns | Reuters). (3) Cost efficiency: Sending USDT, especially on low-fee chains like Tron, costs a few cents – far cheaper than international bank transfer fees. (4) Peg stability: USDT’s price stays tightly near $1, so traders treat it as equivalent to cash for trade settlement. Because of these advantages, Tether is integral to trading strategies. Day traders hold profits in USDT to avoid crypto volatility overnight. Arbitrageurs use USDT to exploit price differences across exchanges (since moving USDT is faster than moving fiat). Even traditional arbitrage between fiat and crypto markets often goes through USDT – for instance, if Bitcoin is cheaper on one exchange, arbitrageurs might sell USDT for BTC there and simultaneously buy USDT with BTC on another exchange. In essence, USDT serves as the bloodstream of crypto trading. Its presence on so many venues also means it improves market efficiency, as prices for assets across exchanges can be more tightly arbitraged via a common stablecoin. For investors, this means holding USDT gives immediate access to trading opportunities across the entire crypto market with minimal friction.

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