Why Tether (USDT) price fluctuates and not stay exactly at 1 USD?
I've read that each Tether token is backed by 1 United States Dollar. It is called stable coin and is designed to be always worth $1.00. But looks like it doesn't seem to maintain 1:1 with USD.
In coinmarketcap I see the price went as low as $0.92 on April 2017, $0.97 on October 2017 and now the price of 1 Tether is $0.99. Also at one point the price went as high as $1.07.
So why the price of Tether not stable at 1 USD? Please explain. Thanks!
Its because the price is based on this 2 factors; supply and demand. If more number of people trade crypto for stable coins like USDT or USDC and if there is not enough liquidity then it will push the price up. Likewise, more number of people trading USDT for crypto will cause its price to drop. The price is based on what people are willing to pay for it; whether it be USDT or Bitcoin.