The reason why USDT is "stable" lies in its centralized reserve mechanism, which strives to maintain a 1:1 peg with the US dollar. Its stability is not based on market consensus but rather on the underlying asset support and the operations of the issuer, Tether.
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Reserve backing: one dollar for one USDT
Tether claims that for every USDT issued, an equivalent amount of US dollars or highly liquid assets is deposited in a bank account. These assets constitute the "reserves" of USDT. When users want to exchange USDT back to fiat currency, Tether will redeem and destroy the corresponding amount of USDT. This "issuance-redemption" closed loop is the cornerstone of its value stability.
According to a third-party audit report from 2025, cash and cash equivalents account for over 80% of its reserve composition, with the remaining portion including short-term U.S. Treasury bonds, commercial papers, etc. Although there have been historical controversies regarding the transparency of its reserves, in recent years, regular disclosures and audits have increased market trust in its backing. For example, early 2025 data showed that its reserve ratio once exceeded 100%, meaning the assets held were even slightly more than the total circulating USDT.
Market necessity: the "quasi-currency" of the crypto world
The stability of USDT also comes from its absolute dominance in the crypto ecosystem. Over 90% of global exchanges use USDT as the primary trading pair, such as BTC/USDT and ETH/USDT. This extremely high liquidity means there are always a large number of buyers and sellers at any time, making it difficult for prices to be easily manipulated or deviate significantly from 1 dollar.
In countries with severe inflation, such as Argentina and Turkey, the public views USDT as a tool to combat the depreciation of their local currency, and this actual demand further solidifies its value. When people generally accept and believe that 1 USDT ≈ 1 dollar, this consensus itself becomes a stabilizing force.
Technology and efficiency: multi-chain support reduces costs
USDT has expanded from the initial Bitcoin network to more than a dozen public chains, including Ethereum and Tron (TRC-20). Particularly, USDT on the Tron network has transfer speeds as fast as seconds and transaction fees as low as a few cents in RMB. This efficient, low-cost cross-border transfer capability gives it an advantage over traditional banking systems in scenarios such as international trade settlement and personal remittances, thereby reinforcing its function as a medium of value.
Essentially, the "stability" of USDT is the result of the interplay between reserve assets, market consensus, liquidity, and technological efficiency. However, it is not without risks; its highly centralized management, changes in regulatory policies, and the quality of reserve assets are all potential destabilizing factors.