Tether is the most popular cryptocurrency for those who want a stablecoin. Stablecoins are cryptocurrencies tied to another asset, and for Tether, that asset is the U.S. dollar.
If you want to transfer money using cryptocurrency, but you don’t want to use a volatile coin that could change in price, Tether is one solution. Some crypto investors also buy Tether to lend it out, as it’s possible to earn 25% interest this way.
Buying Tether is a simple process once you know how to do it, but there are a few potential mistakes you should know about.
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1. Picking the wrong crypto exchange
The most important part of buying Tether and any other cryptocurrency, is choosing a quality exchange. Scams are common in the world of crypto. There are plenty of fake and unregulated exchanges that could steal your money.
Research any exchange that you’re interested in to make sure it’s legitimate. Check how long it has been around, what other people are saying about it, and whether it has had any problems in the past. You can play it safe by sticking to the best cryptocurrency exchanges that have established good reputations.
One other thing to remember when selecting an exchange is to make sure it offers Tether. Many of the major exchanges sell Tether, given that it’s such a popular crypto. But there are exceptions. For example, the Gemini exchange doesn’t have Tether and instead sells its own stablecoin, Gemini dollar.
2. Buying if the price is above $1
Tether is pegged to the U.S. dollar, which means the price is typically $1. But there can be small, occasional fluctuations.
These fluctuations are most common during periods when crypto prices are falling and many investors want to get out of more volatile coins to a more stable asset. That increases the demand for Tether and can temporarily push up the price by a few cents.
A few cents may not seem like much, but look at it like this — even if you buy Tether for $1.02 instead of $1, it’s like paying an extra 2% fee on the purchase.
The company that issues Tether, Tether Limited, manages the supply and corrects price fluctuations. If the price is above $1, hold off on your purchase. It shouldn’t be long before you can buy it for $1 again.
3. Putting your savings in Tether
Tether is usually worth $1, and you can earn far more interest lending it than you would with the best high-yield savings accounts. Based on that, doesn’t it make sense to put your savings in Tether instead of the bank?
Not quite. While they may seem safe, Tether and other stablecoins are a much riskier place for your money than a bank account.
Tether makes no legal guarantee that 1 Tether can be exchanged for $1. Most banks offer FDIC insurance that protects up to $250,000 per account in the event of a bank failure. Tether isn’t FDIC-insured, so if the company behind it fails, you’d have no protection.
There have also been controversies with Tether and its reserves in the past. Tether Limited used to claim that every Tether was backed by a U.S. dollar, but that turned out to be false. In a recent reserves breakdown, Tether Limited revealed that 2.9% of Tether was backed by cash.
4. Paying too much in fees
The amount of fees you pay when buying Tether depends on two factors: The crypto exchange and the payment method.
Reputable exchanges all tend to have competitive fees. If you pick a good exchange, then you can expect to pay a reasonable amount.
There may be a few different payment options, such as:
- Bank account transfer
- Debit or credit card payment
- Money wire
Review the fees associated with each payment method to choose the most affordable option. In most cases, it’s cheapest to transfer money from your bank account.
5. Expecting to have your Tether right away
It could take several days between placing your order and receiving your Tether. When you transfer money from your bank account to buy crypto, the transfer process usually takes three to five business days.
Other payment methods, such as debit cards, have faster processing times. Since those cost you more, it’s better to use a bank account transfer and plan for the delay.
Even when buying a stablecoin like Tether, there are some common pitfalls to watch out for. Now that you’re aware of them, you can buy Tether without issue.