Top Reasons Why Tether Continues to Soar High

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Despite the Chinese government’s countrywide crackdown on crypto-related activities, Chinese traders continue to flock the market and prosper. Crypto enthusiasts from China had turned to Tether (USDT) to deal with banking restrictions. 

Previously, China implemented a total ban on cryptocurrency trading and prohibited crypto exchanges and entities from accessing financial services from local banks. However, persistent Chinese traders have found a way to enter and exit crypto markets using stablecoin Tether. With the help of virtual private networks, traders can access a crypto exchange platform registered outside the country and use it as an intermediary to trade the digital currency for fiat money and vice versa. 

According to CoinMarketCap, having received massive adoption from Chinese traders, it is not surprising why Tether’s market cap rose to $4 billion this month, a notable all-time high. Furthermore, Binance and Huobi reported that 40-80% of their trading transactions involve the use of the stablecoin. Currently, Binance offers traders loans which are collateralized by USDT. 

CoinMetrics also released data which shows the wide gap of USDT and its Ethereum-based rival USDTe in terms of a full year’s transactions. The former had 78,100 active digital wallets while the latter only recorded around 21,300. ETH Gas Station further revealed that Ethereum mines facilitated a secondary version run of USDT. Reportedly, the service cost Tether $261, 000.  

Chart by Coinmatics

In terms of liquidity, Tether flourishes. investors primarily use the stablecoin as fiat gateways. Businesspeople also prefer using USDT for cross-border trading. Two OTC traders from Asia also revealed that the majority of their traction could be attributed to Chinese investors. Notably, these customers want to move their assets out of the country without directly violating the existing crypto laws. 

What the experts think

According to the industry’s analyst, the significant Tether adoption from Chinese customers are not driven by fear of negative capital flight patterns, instead, they are preparing for the return of a bullish market. A trader from the US stated that Tether presents the most convenient way of holding a relatively unwavering volume of value at a crypto exchange that doesn’t support dollars. 

Although OTC trading experiences a gray market in China, Tether relies on OTC traders for fiat on-ramps. Then, Chinese traders turn to major crypto exchanges such as Binance, OkCoin, and Huobi to liquidate their portfolios. This system hurts the Bitcoin market because crypto exchanges and traders generally use the world’s leading cryptocurrency in liquefying their assets for fiat. However, a Hong Kong-based trader stated that there is another reason why the role of Chinese traders in the market are increasingly becoming significant. This source confirmed that billions of dollars not associated with capital controls are coming out of the country. 

Aside from Tether, other crypto entities have declared the surge in the number of their Chinese clients. FTX, a cryptocurrency futures market shared that its transaction’s daily volume plays between $60M to $310M. According to the CEO of the company, Sam Bankman, they have around 10 000 users from China. 

However, even in terms of futures contracts, USDT still emerges as the real winner. In a 2019 report, it has been found out that the relative stability of the asset had hardly been scratched by the admission that Tether is not backed by US dollar in a 1:1 ratio. 

Meanwhile, Tether’s associated company, Bitfinex, currently faces allegations from a New York court regarding a massive fund loss cover-up. However, a Chinese investor who sought anonymity revealed that Bitfinex received $1 billion for the exchange’s token sale conducted this summer. As many users are aware that Bitfinex plays a significant role behind Tether’s success, this event serves as an insurance for USDT’s reliability

 

 

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