How does Tether (USDT) keep a stable price?

[sand9999]

General demand and supply changes the price of Bitcoin, Ether etc.

How does Tether keep it stable?

Do they release new tokens when there is more demand? Or, do they buy back them when there is less demand?

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[minthit]

They said it was backed by USD and the number of tokens depends on how much USD they have. Don't know for now because there have been serious allegations against the organization.

[kryptogunner]

The intial idea was that they shall have usd dollar in deposits for every token that is purchased by someone. So on a day lets say A buys 5 tokens then they shall make 5 usd depoits in lieu of 5 tokens sold. similarly if A sells 5 tokens later and B buy 3 tokens , then there shall be an out go of 2 usd and accordingly 2 tokens which were created earlier shall be burnt. So in nutshell amount of circulating tokens at any given time is equivalent to usd deposits in banks.

But then you cannot ask a cat to take care of milk. transparency of operations under serious threat currently.   

[The Demon Slick]

With confidence, it works. Without, it fails. If we value it at 1 dollar, and everyone believes it's worth one dollar, and trades it as if it's worth one dollar, then it is worth one dollar. Btc is not backed by gold or fiat. Neither I believe is tether.

[kryptogunner]

With confidence, it works. Without, it fails. If we value it at 1 dollar, and everyone believes it's worth one dollar, and trades it as if it's worth one dollar, then it is worth one dollar. Btc is not backed by gold or fiat. Neither I believe is tether.

I beg to differ with you on this. You are probably mixing up vloatility of a cryptocurrency with its valuations. Why USD is stable with respect to Bitcoin is beacuse there are much less supply and demand imbalances. That means there are almost equal forces acting to buy on falls or sell on rises. The underlying reason for linking Tether with USD was to control the volatility and provide a safe cryptohaven in case the general crypto market is in downward trend or may be you want to make some payments which are averse to volatility.

How much is USDT valued: 1 USD as it is asset backed, opoosite to BTC which is not asset backed.

I hope I could convey my message in a lucid manner.