What is USDT? USDT (Tether) is a cryptocurrency known as “stablecoin” which, unlike most volatile cryptocurrencies such as BTC or ETH was designed to maintain a stable value pegged to a traditional fiat currency, in this case the US dollar. The main idea is that 1 USDT should always be worth about 1 USD.
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What is USDT. How it works
The operation of USDT is based on the concept of reserve. The issuing company, Tether Limited, states that each unit of USDT outstanding is backed by an equivalent amount of real assets held in its reserves. These reserves may include:
- fiat currencies (US dollars): this is the basic idea, that for every USDT issued there is 1 USD in a bank account.
- Cash equivalents: Short-term liquid financial instruments.
- Other assets: Corporate bonds, precious metals and even other cryptocurrencies.
Issuance and redemption mechanism:
- Issuance: When a user wishes to buy USDT, they send US dollars (or other fiat currencies accepted) to Tether Limited. In return, Tether issues an equivalent amount of USDT and sends it to the user’s digital wallet.
- Redemption: Similarly, when a user wants to sell USDT and receive US dollars, they send USDT back to Tether Limited. The company destroys (burns) those USDT tokens and sends the USD equivalent to the user from its reserves.
Advantages of using USDT in trading
Price stability
When the crypto market goes through periods of uncertainty or major corrections, USDT becomes a safe haven. You can quickly convert your volatile cryptocurrencies into USDT to preserve the value of your investments. This move, known as “flight to safety”, is used by professional traders around the world.
For traders using scalping or day trading strategies, USDT provides a constant reference point. You can accurately calculate your profits and losses without worrying that the currency in which you measure your performance will fluctuate independently of your trades.
High liquidity and fast order execution
USDT has one of the highest liquidity in the entire crypto market. You can buy or sell large amounts of USDT without significantly affecting the price. Most trading pairs on major exchanges include USDT. This wide availability gives you immediate access to any cryptocurrency you want to trade, without having to do complicated conversions across multiple currencies.
Low trading costs
Transaction fees for USDT are generally lower compared to other traditional payment methods. This savings becomes significant for active traders who execute multiple trades daily.
On the Tron network (TRC-20), USDT transfers can cost less than USD 1, regardless of the amount transferred. This cost efficiency makes USDT perfect for inter-exchange transfers or portfolio rebalancing.
Unlike traditional bank transfers, which can take days and cost USD 15-50 per transfer, USDT allows you to move funds quickly and cheaply. This flexibility is essential for traders who work with multiple platforms or frequently raise capital.
Low costs mean more of your profits stay in your pocket. For high volume traders, the tax savings can represent thousands of dollars a year.
Accessibility and ease of use
USDT is supported on almost all trading platforms worldwide. This eliminates technical barriers and allows you to focus on trading, not the logistics of transferring funds.
You don’t need advanced technical knowledge to use USDT. The process of buying, holding and transferring is as simple as any other cryptocurrency. Many platforms offer USDT to USD pairs for example, allowing you to trade directly from your local currency. This feature eliminates the need for multiple conversions and simplifies profit and loss calculations.
Practical strategies to generate profit
Arbitrage between exchanges
One of the simplest strategies to earn with USDT is arbitrage.
It involves buying USDT on one exchange where the price is lower and selling it on another exchange where the USDT price is higher.
To implement this strategy effectively:
- Monitor the USDT price on multiple platforms
- Calculate transfer fees between exchanges
- Make sure the price difference covers all costs
- Execute trades quickly to avoid price changes
Yield farming and staking with USDT
Many DeFi platforms offer rewards for users who deposit USDT into their protocols. These opportunities can generate annual returns between 5% and 20%, considerably higher than traditional bank interest rates.
Popular platforms for yield farming with USDT include:
- Compound Protocol
- Aave
- Curve Finance
- Yearn Finance
Trading on pairs
USDT serves as the base currency for many pairs trading on most exchanges. You can use this feature to implement trading strategies such as:
Swing trading: you buy cryptocurrencies when prices are low and sell them for USDT when prices rise, keeping your profits in stablecoin until the next opportunity.
Dollar cost averaging: Invest a fixed amount of USDT in cryptocurrencies on a regular basis, regardless of market fluctuations.
How to buy and sell USDT simple
On centralized platforms
Most major exchanges offer USDT trading pairs. The process is simple:
- Create an account on the exchange
- Deposit funds in USD or EUR
- Buy USDT directly from the spot trading section
- Transfer USDT to your personal wallet for maximum security
On decentralized platforms
You can use Abarai, a decentralized exchange that does not store your funds and allows you to buy USDT quickly and without hidden fees. For transactions under 1000 USD, no ID is required (just provide your billing details) and the process takes just a few minutes.
Through crypto ATMs
Some big cities in Romania have crypto ATMs that allow buying USDT with cash. Although the fees are higher, this method offers complete anonymity and instant access to USDT.
Important risks and precautions
Counterparty risk
USDT depends on the creditworthiness and honesty of Tether Limited. If this company were to experience financial problems or be closed by the authorities, the value of USDT could be significantly affected.
Technical risks
USDT transfers on different blockchains have specific risks:
- Ethereum network congestion can increase fees
- Sending USDT on the wrong blockchain may result in loss of funds
- Errors in wallet addresses can be irreversible
To minimize these risks:
- Always check the blockchain before transfer
- Test with small amounts before large transfers
- Use hardware wallets for long-term storage
- Diversify between several stablecoins
Alternatives to USDT
Although USDT is the most popular stablecoin, there are alternatives that may be more suitable for certain strategies:
USDC (USD Coin): considered more transparent than USDT, with regular reserve audits.
DAI: A decentralized stablecoin that does not depend on a central company to maintain stability.
BUSD (Binance USD): Issued by Binance in partnership with Paxos, offers tight integration with the Binance ecosystem.
Commission optimization
Commissions vary depending on network congestion. To save money:
- Avoid peak hours when the network is congested
- Use apps that show real-time charges
- Group several small transactions into one large one when possible
Integrate USDT into your crypto portfolio
Optimal allocation
Experts recommend keeping a portion of your crypto portfolio in stablecoins like USDT. This allocation can vary between 10% and 50%, depending on:
- Risk tolerance
- Investment objectives
- Market conditions
- Trading experience
Regular rebalancing
Use USDT to rebalance your portfolio when certain cryptocurrencies become excessive in weight or value. This strategy helps you realize profits from assets that have grown and reinvest in those with growth potential.
Useful tools and apps
Tracking and monitoring
To track USDT performance and identify opportunities:
- Abarai – Cryptocurrency Price : For up to date prices
- DeFiPulse: For yield farming opportunities
- Messari: For fundamental analysis
- Whale Alert: For monitoring large transactions
Recommended wallets
USDT security depends on choosing the right wallet:
- Hardware: Ledger, Trezor for long-term storage
- Software: MetaMask, Trust Wallet for accessibility
- Mobile: Binance, Crypto.com for frequent trading
Maximize your profits
USDT is much more than just a stablecoin – it’s a powerful tool for protecting and multiplying profits in the crypto ecosystem. Its stability provides security in volatile times, and its versatility allows the implementation of sophisticated trading and investment strategies. Success depends on understanding crypto market fundamentals and applying the right strategies for your goals. Start small, learn from experience and increase your exposure as your knowledge grows.
On the Abarai blog there are a number of educational articles that can help you better understand the world of cryptocurrencies. We invite you to explore our resources for deepening your knowledge about the fundamentals of blockchain technology, Bitcoin, Ethereum, Cardano, Polkadot, Dash or other popular cryptocurrencies as well as effective risk management strategies in virtual currency investing. We recommend you read: