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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest.
- The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
- The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
- You should not expect to be protected if something goes wrong.
- The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You may not be able to sell your investment when you want to.
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
- Cryptoasset investments can be complex.
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here
For further information about cryptoassets, visit the FCA’s website here
Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
If an investor wants to learn how to buy Tether (USDT), then this might be the right place to find out. Unlike Bitcoin or Ethereum, where day-to-day changes in price are expected, Tether is a stablecoin that aims to hold a near-constant value. However, this is not guaranteed.
While Tether does experience bumps here and there, most holders aren’t looking for price appreciation. As the name suggests, the virtue of a stablecoin is the pursuit of stability rather than price gains.
Tether is a stablecoin. What is a stablecoin?
Headlines about cryptocurrency typically describe wild price movements. But that has not been typically true of Tether, which is designed to aim for a stable value thanks to its US dollar peg. However, past performance is not a reliable indicator of future results and many stable coins have plummeted loosing upto 98% of their value.
Stablecoins like Tether have to date in the main kept their constant value because they are backed by a fund of collateral assets. In the world of crypto, USDT is referred to as a “collateralised stablecoin.”
Tether is not completely free of risk, however. On May 12, Tether lost its $1 peg amid the TerraUSD (UST) stablecoin crash, dropping as low as $0.9485 before recovering to its intended one-to-one peg with the U.S. dollar.
Terra price
While a few cents might not seem like much, this momentary price fluctuation demonstrated that stablecoins aren’t a sure thing in cryptoworld.
Tether also presents risks because of a lack of regulation, says Brian Gallagher, co-founder of Partisia Blockchain. Gallagher points out that there’s no public auditing to check whether the reserves for Tether can fully back the $75.6 billion (£60 billion) in USDT in circulation.
If it were to be revealed that the Tether treasury only has $5 billion (£4 billion) in reserves, that would mean there’s a discrepancy between what is circulating around blockchains as USDT, compared with the real amount in US dollars and assets backing Tether, he says.
A similar situation already came to fruition. An October 2021 announcement by the Commodity Futures Trading Commission declared that Tether would pay a $41 million (£33 billion) fine for misleading claims that the U.S. dollar fully backed it.
The commission found that between June 1, 2016, to February 25, 2019, “Tether misrepresented to customers and the market that Tether maintained sufficient U.S. dollar reserves to back every USDT in circulation with the ‘equivalent amount of corresponding fiat currency.’
Despite the controversy, Tether has regained its dollar peg and still endures as the stablecoin with one of the largest market caps.
Where can investors buy Tether?
One can buy Tether on most of our picks of the best cryptocurrency exchanges.
Suppose an investor wants to pair their Tether holdings with other cryptocurrencies. In that case, it’s easy to do. Most centralised exchanges and many decentralised exchanges allow users to pair Tether with other cryptocurrencies.
While Tether doesn’t truly “pair” to other cryptocurrencies since it’s a stablecoin pegged to the U.S. dollar, it remains to some a popular way to purchase crypto as a way of being liquid in the markets.
Kaiko, a digital assets provider, found in October 2021 that nearly half of Bitcoin trades are executed using Tether.
How to buy Tether
For investors that decide that Tether holdings make sense for their financial goals, they can buy Tether in a mere three steps:
1. Choose A Crypto Exchange
Buying Tether begins with choosing a cryptocurrency exchange. An exchange allows investors to buy and sell cryptocurrencies. In the case of Tether, they will be able to use their US dollar deposits to purchase Tether coins.
Crypto exchanges vary in both complexity and fees. So before committing to one to make a Tether purchase, be sure to compare multiple exchanges.
2. Buy Tether
After selecting the exchange, an investor can make their opening deposit. While Tether is a stablecoin aimed not to be as volatile as cryptocurrencies like Bitcoin, purchases could still lose value and may be very volatile.
Placing a crypto trade can be easy when an investor is ready to buy Tether. They just need to initiate a “buy” transaction using Tether’s ticker symbol—USDT—and the dollar amount they want to purchase. Once the transaction is finalised, they become a proud owner of Tether.
3. Store Tether
There are several types of crypto wallets an investor may want to use to store their Tether:
- Hardware Wallets. Investors wanting to store Tether offline, can use a hardware wallet. For example, Ledger and Prokey are hardware wallets that support Tether.
- Paper Wallets. These crypto wallets contain two key pairs—a public and a private key and two different QR codes—all printed on paper. This mode of storage is often referred to as noncustodial cold storage.
- Software Wallets. Investors can also download software to their computers or mobile devices to store their crypto.
- Crypto Exchanges. Several exchanges offering USDT offer customers a built-in wallet for storing their USDT holdings.
What can you purchase with Tether?
When an investors own Tether, they can use it to purchase a wide variety of cryptocurrencies. To do so, they must just find and exchange USDT with the cryptocurrency they want to purchase.
According to Coinsbee, they can cash in their stash of Tether for gift cards at popular e-commerce shops, such as Walmart and Amazon.
They can also earn interest on their Tether holdings, similar to the bank. Specialty online cryptocurrency savings accounts lets investors deposit USDT and should earn interest rates considerably higher than most online banks. They may want to use a site like Bitcompare to find the best rates.
Should investors buy Tether?
Tether could be a good buy for some specific crypto investors. It may be a suitable choice for liquidity when looking for a way of getting in and out of other cryptocurrency trades.
Some crypto experts like Najah Roberts, CEO and founder of Crypto Blockchain Plug, remain cautious of Tether because of its treasury strength.
Investors seeking alternatives to Tether may want to look at other collateralised-based stablecoins, such as USD Coin (USDC) and Dai (DAI).
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
