The Tether price displayed on cryptocurrency exchange Kraken’s website.
Tiffany Hagler | Bloomberg via Getty Images
Tether is the third-biggest cryptocurrency in the world by market value. And it’s got some economists — including an official at the U.S. Federal Reserve — worried.
Last month, Boston Fed President Eric Rosengren raised the alarm about tether, calling it a potential financial stability risk. Meanwhile, some investors believe a loss of confidence in tether could be crypto’s “black swan,” an unpredictable event that would severely impact the market.
The issues surrounding tether hold significant implications for the nascent cryptocurrency world. And economists increasingly fear that it could also impact markets beyond digital currencies. Here’s what you need to know:
What is tether?
Chances are you’ve heard a thing or two about bitcoin. But what about tether?
Like bitcoin, tether is a cryptocurrency. In fact, it’s the world’s third-biggest digital coin by market value. But it’s very different from bitcoin and other virtual currencies.
Tether is what’s known as a stablecoin. These are digital currencies that are tied to real-world assets — the U.S. dollar, for example — to maintain a stable value, unlike most cryptocurrencies which are known to be volatile. Bitcoin, for example, rose to an all-time high of nearly $65,000 in April and has since almost halved in value.
Tether was designed to be pegged to the dollar. While other cryptocurrencies often fluctuate in value, tether’s price