Tether maintains a 1:1 peg with the US dollar through three key mechanisms: Tether Limited claims to hold enough US dollar reserves to back each Tether token in circulation ensuring that it can be redeemed for its equivalent value. Tether tokens are created or burned based on user deposits or redemptions of US dollars, adjusting the token supply to match market demand. Market participants can take advantage of price deviations through arbitrage, buying Tether at a lower price and redeeming it for US dollars which stabilises the price around $1.