Chinese investors are turning to stocks with potential repercussions for Tether

USDT has consistently traded below the US dollar since late September, according to CoinMarketCap. The drop is very slight — Tether was trading at $0.9995 to the dollar last Tuesday — but the advice indicates a push to ditch the stablecoin for the yuan and invest in Chinese stocks, which have rallied on recent government stimulus. efforts. The three to five percent USDT liquidation fee does not seem to deter investors who will benefit significantly if the Chinese stock market continues to rise as it has been.

Stablecoins are a type of cryptocurrency that attempt to avoid the volatility associated with other digital assets such as Bitcoin by tying their value to a fiat currency such as the US dollar. USDT, which Tether launched in 2014, has become by far the largest stablecoin and has a current market cap of around $119 billion.

USDT became the mainstream cryptocurrency in China after 2017, when the government banned citizens from exchanging yuan for crypto and restricted access to all crypto trading sites, according to a study by Chainalysis.

Since then, Chinese investors have treated Bitcoin and other digital assets as a safe haven as the domestic economy faltered. These investors got around the restrictions through overseas bank accounts and using over-the-counter offices or exchanges like Binance. China’s exchange brokers pulled in a record $75.4 billion in the first part of the year, according to a Chainalysis report, proving that a strong appetite for crypto still remains despite the bans.

China’s stimulus package

The Chinese government announced a wide range of stimulus efforts on September 24 to ease the country’s economic slump and meet year-end growth targets. These efforts included cutting the reserve requirement ratio by 50 basis points and the 7-day repo rate by 0.2 percentage points. Economists expected these policies to be bullish for crypto, but Bitcoin did not make significant moves, remaining between $50,000 and $70,000.

Following the announcement, the Shanghai Composite Index rose 20%, the most since May 2023. The Hang Seng China Enterprises Index followed suit, rising more than 25% since the end of September. The Shanghai Composite Index has been closed since late September for China’s National Day and reopened today.

While Tether has traded above or below the dollar for most of the year, it hasn’t experienced the massive swings seen in the early years. The stablecoin reached its highest and lowest levels in 2015 at $1.22 and $0.57. For most of 2024, it fluctuated between $1.0022 and $0.9981.