How to Make Money on USDT?
Since the beginning of 2024, the cryptocurrency market has lost more than 60% of its total capitalization. Bitcoin has dropped by 60%, and some altcoins have seen losses of up to 90%. Amid increased volatility, many crypto market participants choose to store their assets in stablecoins like USDT. Beyond offering stability and capital security, Tether, or USDT, can also generate income for its holders, helping to cover inflation.
So, let’s explore the stablecoin universe and find out: can you make money on USDT or not?
Source: CoinMarketCap
What is USDT?
Tether is the largest stablecoin by market capitalization, pegged to the US dollar and issued on the blockchain. Typically, tokens are transferred using the Tron (TRC20) or Ethereum (ERC20) networks. The USDT’s peg to the US dollar is backed by reserves held in a bank. Institutional investors, including cryptocurrency exchanges, can always exchange US dollars for an equivalent amount of USDT and, likewise, exchange USDT for the same amount of US dollars.
How to Earn with USDT?
The USDT exchange rate is pegged to the US dollar, meaning holders of USDT cannot earn profits from its price growth. The primary purpose of stablecoins is to ensure the security and reliability of invested funds.
However, in addition to these properties, USDT still allows its holders to generate income. Broadly, the ways to benefit from USDT can be divided into active and passive. Let’s take a closer look at these methods and investigate how the Tether (USDT) makes money.
Active Ways to Earn with USDT
Active earning methods outlined in this guide involve the holder of stablecoins taking specific actions to generate income. The main strategies include buying or selling USDT when its price deviates from 1 USD, arbitrage between cryptocurrency exchanges, and P2P arbitrage.
When using active earning methods, you should consider transaction and transfer fees since their cost can outweigh the profitability of the operations.
Let’s get into how to earn USDT by looking through the active earning methods.
Earnings from Price Differences
Although USDT is a ‘stable’ coin pegged to 1 USD, its price fluctuates and deviates from this peg under the influence of supply and demand market forces. An active trader can buy USDT when its price drops below 1 USD and sell when it rises above 1 USD. These price deviations can offer up to 0.1% returns with virtually no risk. However, it is crucial to account for transaction fees that could impact profitability.
Arbitrage between Crypto Exchanges
According to the CoinMarketCap website, more than 500 crypto exchanges are currently active. On most of these exchanges, USDT is the primary currency in trading pairs. Due to varying levels of supply and demand across different platforms, asset prices can differ between exchanges. Arbitrage traders, by identifying these price differences, can buy an asset on one exchange where it’s cheaper and sell it on another platform where it’s priced higher. This way, the arbitrage trader profits from the price discrepancies between exchanges, minus any fees involved.
P2P Arbitrage
P2P (Peer-to-Peer) transactions involve direct deals between crypto market participants, where one party sells cryptocurrency and the other buys it. For example, a seller may offer USDT, while a buyer purchases it with fiat money. The buying and selling rates on different exchanges may vary, allowing you to buy USDT on one exchange and sell it for a higher price on another. This creates an opportunity for arbitrage earnings based on the differences between buying and selling rates of USDT.
Passive Ways to Earn with USDT
If you’re eager to know how to earn on USDT, you should consider passive earning methods, where participants have access to investment options that don’t require constant engagement. The listed ways of earning don’t imply any extra expenses for you other than the initial investment of your funds for a specified period.
Keep in mind that investments can carry risks regarding the security of funds. Recent incidents involving the bankruptcy of certain crypto companies that engaged in user fund solicitation and lending serve as a stark reminder of these risks.
Staking
Staking is one method of earning income from assets held in a cryptocurrency portfolio. You are rewarded for locking your tokens in a protocol as collateral to validate transactions.
Staking offers the opportunity to earn profits with low risk in the crypto industry since returns are generated regardless of market sentiment.
You can easily check the current staking yields on the crypto exchanges and other platforms offering these investment opportunities.
Source: Stakingrewards
Providing Loans
The growth of the decentralized finance (DeFi) sector led to the emergence of a wide variety of cryptocurrency lending ecosystems, where you can deposit your crypto into different protocols in exchange for rewards in native tokens or other assets, including Bitcoin (BTC), Ethereum (ETH), and various altcoins.
Providing loans is a low-risk way to get rewards from lending USDT in both bullish and bearish markets.
Today, Aave is one of the leading lending protocols. The platform offers opportunities for depositing and borrowing various tokens, including USDT, with the option to convert them into fiat currency.
Source: Source: CoinMarketCap
The yield for depositing USDT in the protocol fluctuates based on market conditions and the balance of supply and demand. The average yield is around 1.49% per annum, but it can occasionally reach 4% per annum or higher.
Source: app.aave.com
Providing liquidity
It’s one of the core elements of a decentralized finance platform (DeFi). If you choose to contribute funds to new platforms, you’ll be rewarded with high-interest returns on your staked amounts and a share of the fees generated by transactions in the pool.
Long-term investors can explore available pools on the market and find a liquidity pair consisting of reliable projects or even a stablecoin pair, like USDC/USDT, to allocate their funds on various platforms.
Reward rates for participating in liquidity pools vary depending on the cryptocurrency pair. On the decentralized exchange QuickSwap, for example, the yield rates are displayed in a table format.
Source: info.quickswap.exchange
Farming
It’s a concept of using crypto assets to generate the highest possible returns with minimal risk. As new platforms and protocols emerge, they offer increasingly attractive incentives for participants to provide liquidity and boost the total value locked (TVL) in the protocol.
For example, on the decentralized exchange QuickSwap, you can choose to farm the MATIC-USDT pair, offering an annual yield of 39.77%.
Source: quickswap.exchange
How to Earn USDT for Free
If you’re wondering where to earn USDT for free without any effort, you should realize that it’s impossible. The best way of earning USDT doing little is by using ‘faucets.’ You can get a small amount of USDT for certain activities, including watching online ads or clicking on various links. However, the earnings from these faucets are extremely low, and it could take several days just to make 1 USDT.
Conclusion
Crypto investors often acquire USDT as an alternative to the US dollar. Using stablecoins in various projects can provide returns exceeding traditional bank deposits and outpace inflation.
Some investment methods require you to take daily active steps. Certain options for placing USDT offer high returns, but they also come with specific risks. You should thoroughly research the project before deciding to invest in it.
F.A.Q.
What are USDT and USDC provided with?
Most tokens are backed by real assets, primarily US dollars. Recently, reserves have expanded to include other assets, including loans, precious metals, investments, Bitcoin, and corporate bonds.
Is USDT a cryptocurrency?
Cryptocurrency is any form of digital currency that can be exchanged for fiat money. USDT is the first stablecoin that can be exchanged for US dollars at a 1:1 ratio.
Why is USDT pegged to the US dollar?
The US dollar is one of the most stable currencies in the world. The integration of USDT with the dollar virtually reduces currency volatility, making this stablecoin truly ‘stable.’
What affects the USDT rate?
The primary factors influencing a token's price include market demand for cryptocurrencies, legislative and economic changes, the coin's liquidity, and user trust.
