USDT, the stablecoin launched by Tether, is reportedly feeling the effects of Chinese investors returning to their domestic stock market in large numbers.
A recent report from Bloomberg highlights that USDT has occasionally traded below the US dollar value since late September.
Stablecoins are typically pegged to the dollar or another asset at a ratio of 1:1.
Dessislava Aubert, a senior research analyst at blockchain data firm Kaiko, notes that the discount on the stablecoin aligns with a series of easing measures implemented by China’s central bank to combat a deteriorating economic forecast, which has caused stock prices to rise significantly.
According to Livio Weng, CEO of the Hong Kong crypto exchange Hashkey,
“If traders are eager to exchange back into fiat currency, it suggests they are engaging in panic buying of Chinese stocks.”
Aubert indicates that the minor discount on USDT reflects a greater demand for dollars compared to the stablecoin.
Despite a prohibition on cryptocurrency trading in China, residents of the mainland still utilize overseas accounts and exchanges to transact in digital currencies. The report states that using exchange data to ascertain whether Chinese investors are the main drivers behind USDT selling is challenging.
Nonetheless, Binance’s peer-to-peer trading shows sellers of Chinese yuan are willing to convert the leading stablecoin at rates ranging from 6.78 to 6.98 per yuan. In contrast, the yuan is trading at 7.07 per dollar in the traditional currency market.
The Shanghai Composite Index surged by 21% from September 23 to September 30.
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Disclaimer: Views expressed at The Daily Hodl are not investment advice. Investors should conduct their own due diligence prior to making any high-risk investments in Bitcoin, cryptocurrency, or digital assets. Please be aware that your transfers and trades are at your own risk, and any potential losses are your responsibility. The Daily Hodl does not endorse the buying or selling of any cryptocurrencies or digital assets, nor does it act as an investment advisor. It is important to note that The Daily Hodl engages in affiliate marketing.
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