Tether (USDT) is a stablecoin that is designed to maintain a stable value by being pegged to the U.S. dollar. It is one of the most popular stablecoins, launched in 2014 to serve as a bridge between traditional fiat currencies and the cryptocurrency market.
Pegged to the USD:
USDT aims to maintain a 1:1 ratio with the U.S. dollar, making it a low-volatility option compared to other cryptocurrencies like Bitcoin or Ethereum.
Reserve-backed:
The value of USDT is intended to be backed by a reserve of assets, including fiat currency, cash equivalents, and other investments.
Used for transactions:
Its stable nature makes it suitable for trading, making payments, and as a way to hold value without significant price fluctuations.
Market leader:
USDT is the largest stablecoin by market capitalization and has greater adoption than many other stablecoins.
This is the magic trick. No one wants to buy long-term US Treauries so the institutions etc can now buy Tether.
Tether does not pay interest or yield directly to holders of its USDT token; the company generates revenue by earning interest on its reserves. it uses a portion of its profits, earned primarily from US Treasury holdings, to accumulate gold as a strategic reserve and hedge against inflation and economic uncertainty. This accumulation is part of a diversification strategy to enhance the stability of its stablecoin, USDT, and strengthen its overall security.
So let me simplyify. US debt is represented by an IOU (Treasuries) which Tether now buys and the yield or interest is used to buy gold. So when the long term Treasury is mature its value will be worthless (due to inflation) but the yield would have been siphoned off to buy gold. So they are swapping debt for gold. Genius! (lolz).
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