Why is the price of Tether higher than the market price? (Why is Tether’s transaction fee so expensive?)

Why is the price of Tether higher than the market price? According to statistics, Tether’s price is higher than the market price.

In the cryptocurrency trading market, Tether’s market value has surpassed Bitcoin to become the second largest digital asset. However, due to its high volatility, relatively stable price, and undeniable advantages, many people attribute this investment behavior to the increasing demand for and continuous growth of Tether. So what exactly is Tether? First, it is a cryptocurrency based on blockchain technology; second, it is a type of digital token issued by a leading global company; and finally, it has strong anti-censorship and value storage characteristics. Therefore, the reason why Tether is trusted by investors is that it can effectively prevent criminal funds from flowing to criminals.

Why is Tether’s transaction fee so expensive?

In the cryptocurrency market, Tether’s transaction fees are very high. According to data from BitInfoCharts, since January 2020, an average transfer has paid over $10 (about $7). This makes its network fees as high as $20, much more expensive than other mainstream cryptocurrencies such as Bitcoin and Ethereum.

But for those who are unfamiliar with the industry, this is not good news because if we use Bitcoin or Ethereum for transfers, it costs at least 100 cents. And when we consider the transaction costs on the Ethereum network, we find that some issues have been resolved – especially for those who send a large amount of ETH on the Ethereum blockchain. So, if you want to process transactions with USDC, USDP, and PAX, you need to pay. However, if we choose Tether, it may face more serious risks. Therefore, due to the high fees, Tether may experience “congestion”. Why are Tether fees so low? To understand the reasons, let’s look at a set of data:

First of all, from the perspective of transaction types, Tether is based on Bitcoin transactions. Its price is dominated by BTC. On the other hand, as transaction volumes continue to grow and interactions between exchanges become more complex (often involving large transfers), it is favored by investors. However, this is different from other altcoins. For example, the trading volume of USDC is also less but the trading volume of DAI is larger. In other words, users must exchange their fiat currency for stablecoins through a trading pair. That is, once they remit to another digital token, the trading volume will increase.

Secondly, as a store of value like BTC, the value of Tether is not controlled by any entity. Even companies that own BTC can hold Tether as reserves and they will not sell it. Although the stocks of these companies can generate income sources through Tether, they will only sell them to retail investors in the market.

There is also a belief that if users want to buy Tether instead of Bitcoin, they can earn more profits by converting fiat currency into Tether, which is the advantage of Tether. As CoinDesk previously pointed out, “Tether actually has no substantial impact” and it comes from the trading platform Tether. Despite the emergence of various competitors, such as Bitfinex and Gemini, Tether seems to have no attractiveness – except for a few competitors, most of them are issued by exchanges.

In addition, due to the highly volatile nature of Tether, it is difficult to accurately measure the price changes of Tether.