Although the Chinese government has officially banned cryptocurrencies for years, this does not prevent many citizens from trading cryptocurrencies and allows Chinese investors to influence the crypto market. is. The latest example is Tether. Its USDT stablecoin is pegged to the dollar, but has recently been trading at a slight discount. The reason, some economists say, is that Chinese investors are cooling down on cryptocurrencies and are instead putting their money into the country’s stock market.
According to CoinMarketCap, USDT has been consistently trading below the US dollar price since late September. The decline was very slight, with Tether trading at $0.9995 to the dollar last Tuesday, but the hint comes from China, which has dumped its stablecoin against the yuan and soared as a result of recent state stimulus. This indicates a move to invest in stocks. effort. USDT clearing fees of 3% to 5% do not appear to be a hindrance to investors who would benefit greatly if the Chinese stock market continues to soar.
Stablecoins are a type of cryptocurrency that seeks to avoid the volatility associated with other digital assets such as Bitcoin by tying its value to a fiat currency such as the US dollar. Launched by Tether in 2014, USDT has become the largest stablecoin to date, with a current market cap of approximately $119 billion.
According to a study conducted by Chainalysis, USDT has become the most popular cryptocurrency in China since 2017, when the government banned citizens from exchanging renminbi and cryptocurrencies and restricted access to all crypto trading websites. It became.
Since then, Chinese investors have treated Bitcoin and other digital assets as safe-haven assets amid the country’s economic downturn. These investors have circumvented the restrictions by using overseas bank accounts, over-the-counter counters and exchanges like Binance. According to a report by Chainalysis, over-the-counter brokers in China raised a record $75.4 billion in the first half of this year, proving that despite the ban there remains a strong appetite for cryptocurrencies.
China’s economic stimulus package
The Chinese government announced on September 24 a wide range of stimulus measures to curb the country’s economic downturn and meet year-end growth targets. These efforts include lowering the reserve requirement ratio by 50 basis points and reducing the seven-day repo rate by 0.2 percentage points. Economists expected these policies to be bullish for cryptocurrencies, but Bitcoin hasn’t made much of a move, hovering between $50,000 and $70,000.
Following the announcement, the Shanghai Composite Index rose 20%, its highest since May 2023. The Hang Seng China Enterprise Stock Index has followed suit, rising more than 25% since late September. The Shanghai Composite Index had been closed since the end of September due to National Day, but it reopened today.
Although Tether has traded up and down against the dollar for most of the year, it hasn’t experienced the big swings seen earlier. The highest and lowest values of the stablecoin reached $1.22 and $0.57 in 2015. It has been hovering between $1.0022 and $0.9981 for most of 2024.
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