Why is the price of Tether higher than the dollar?

In general, the costs of indirect supply of Tether from foreign sources and the growth of demand in the market are the most important reasons that cause the value of Tether to be higher than the paper dollar in Iran.

While the price of Tether is linked to the US dollar, in reality we see that its price (in terms of Rials) is more expensive than the dollar in the domestic market. Also, Tether is typically subject to fluctuations that dramatically affect the value of other cryptocurrencies such as Bitcoin.

To answer this question thatWhy is the price of Tether higher than the dollar?It is necessary to understand how to determine its price in the market and the factors affecting the final price of this stable coin.

Why is the price of Tether higher than the paper dollar in Iran?

Problems of supplying Tether from foreign sources

No institution in Iran officially pays traders paper dollars in exchange for receiving Tether; As a result, there is no direct relationship between the price of Tether and the dollar in our country. Domestic businesses and individuals are also unable to obtain Tether directly from the issuing company due to US Treasury sanctions. As a result, they will have to provide their needed Tether through large foreign exchanges such as Binance or other intermediaries.

In the process of providing Tether from foreign sources, the costs of transferring dollars, the fees of exchanges or supplier intermediaries and the time taken in the purchase process also lead to an increase in the total price of Tether for domestic exchanges.

Supply and Demand

Supply and demand is another factor that can cause a difference between the price of Tether and the dollar. The growth of demand to buy this stablecoin, both in the global market and in the domestic market, will cause a temporary increase in its price.

The various uses of Tether for Iranian users have caused the demand for this stablecoin to be high. From traders who use it to send money to an exchange or convert their assets into cash when the volatility of the digital currency market increases, to people who use Tether like the dollar as a hedge against inflation.

The volume of exchange transactions

The volume of transactions and liquidity of Tether in exchanges is another factor that can increase the price of this stablecoin in the market. In general, the trading volume and low liquidity of an exchange will increase the influence of large traders on Tether price. On the other hand, with the increase in the volume of transactions, we can expect that the transactions will be done at more reasonable prices.

Also, before making your transactions, you can use the Tether purchase page of the Erzdigital website to check the current exchange rate of this stablecoin among Iranian exchanges.

Greater influence of the digital market

The digital nature of Tether allows traders to buy and sell it 24/7. In contrast, official US dollar trading is limited to certain hours during weekdays.

This feature increases the effectiveness of the price of Tether to market news and events. For example, while a news release on Thursday evening can quickly send the price of Tether up, the price of the dollar won’t change much until the official markets open on Saturday.

No legal restrictions

The Iranian government’s foreign exchange policies are another effective factor in increasing the price difference between Tether and paper dollars. The imposition of various legal restrictions on the purchase of currency in the open market has caused some people who have this possibility to replace paper dollars in their transactions with Tether. A problem that itself causes the growth of the demand to buy Tether and, as a result, the increase in its price compared to the US dollar in the Iranian market.

What is the difference between the price of Tether and the dollar usually?

Normally, the difference between the price of Tether in Iranian exchanges and the open market dollar is about 1,000 Tomans. Of course, this difference can be different depending on the market conditions and the amount of supply and demand. With the increase in volatility in the digital currency market, the price difference between Tether and paper dollars also increases.

For example, in December 1400, after the sharp fall in the price of Bitcoin, when the US dollar was traded in the open market in the range of 27,500 to 29,000 Tomans, the price of Tether reached 33,000 Tomans in domestic exchanges.

At the same time as prices fall in the market and traders rush to convert their digital currencies into stablecoins in order to avoid further losses, the price of Tether increases in the exchanges. On the other hand, the growth of the price of Bitcoin and other digital currencies will cause traders to sell Tethers to enter the market. An issue that can lead to an increase in supply and a decrease in the price of Riyal Tether against the paper dollar.

Also Read: Why Tether Gets More Expensive When Cryptocurrency Price Fluctuates?

Tether price for traders

The final price means the total amount of Rials that a trader must pay to buy a certain amount of Tether, including all costs. For example, if the transaction fee in a domestic exchange is 0.3%, in order to buy 100 Tether at the price of 50,000 Tomans, the user must also pay 0.3% of the transaction amount (0.3 Tether or 15,000 Tomans) and the net amount which actually spent for the purchase of each Tether unit will be a little more than 50,000 Tomans.

Digital currency exchanges, according to their policies, receive fees for providing services to users. The fee received by each exchange will also be different depending on the type of transaction. Usually, exchanges charge more commissions for transactions that take place in the real-time (user-to-user) segment. On the other hand, the transaction fee of the exchange market sector (user to user) is much lower.

It should be noted that this issue is not directly related to the discussion of the reasons for the difference between the price of Tether and the paper dollar, but the calculation of the final price can be important to reduce the costs of traders, especially in large amounts.

In addition, some traders who intend to use international exchanges end up having to pay another additional fee, the withdrawal fee. Tether has been released in various blockchains such as Ethereum and Tron. The different mechanism, scalability and the amount of activity of users in each of these networks affect the fees paid by traders to withdraw Tether from the domestic exchange. For example, users who use the Ethereum network to transfer Tether, compared to the Tron network, pay more fees to withdraw from domestic exchanges, and their total cost will be higher for a certain amount of Tether they receive in a foreign exchange.

Conclusion

Finally, it can be said that in addition to the cost of securing Tether from foreign sources, other factors such as restrictions on buying dollars in Iran, the current economic conditions, ease of access and use, all directly or indirectly increase the demand for this stable coin and as a result the price is higher. It is compared to the US dollar.