Planning to Short Bitcoin? Better Check China’s ‘Tether Premium’ First

Bitcoin's rapid rebound after its largest two-day sell-off in nearly a year shows the strength of a recently overlooked factor in cryptocurrency markets: demand from Chinese retailers.
Prices for the largest cryptocurrency were higher on Wednesday, stabilizing around $ 49,000 after falling 15% in the past two days.
The sudden demand from Chinese traders for Bitcoin (BTC), which may be motivated by the drop in prices, can be assessed using a key figure that has been largely ignored: the “tether premium” - or the difference between the prices in yuan on the dollar-pegged one Stablecoin tether (USDT) from over-the-counter cryptocurrency traders and the implied yuan price for tether, based on the prevailing rate in world markets.
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Under normal market conditions, the tether should have depreciated against the yuan as the Chinese currency appreciated against the dollar in the foreign exchange markets. However, cables denominated in Chinese yuan have been trading at a premium since last week, allegedly due to increased demand from traders in the country who routinely use the stablecoin as a ramp for crypto markets. The practice of trading directly in government-issued currencies remains banned in China.
"More and more Chinese investors have started to enter the market, although the bull market has been mainly driven by US-based institutional investors since 2020," Flex Yang, founder and CEO of Hong Kong-based crypto lender Babel Finance, told CoinDesk. “Chinese investors, especially those with very little bitcoin exposure, are now looking for channels to buy bitcoin. Buying Bitcoin through USDT is the most direct channel that has resulted in increased demand for USDT in the [over-the-counter] market. "
According to a spokesman for the parent crypto exchange Huobi, Tether has been sold at Huobi OTC with premium since last Friday. The premium rose to 2% on Tuesday. Under normal market conditions the premium is zero or negligible.
"As people rush to the market in a bull run, the demand for USDT is increasing significantly," Ciara Sun, vice president of Huobi Global Markets, told CoinDesk. "OTC traders will also take the opportunity to raise prices well above the exchange rate."
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At OKEx, another Asia-focused cryptocurrency exchange, the over-the-counter switch also saw rising prices for cables when it was denominated in Chinese yuan.
"Some traders are buying tether to buy the general slump in the market," said Robbie Liu, market analyst at OKEx Insights.
Liu said the so-called tether premium does not simply imply increased demand for cryptocurrencies from new investors, as in a volatile market many experienced traders will buy more tether to maintain margin requirements for leveraged positions.
The Chinese retail market's renewed interest in bitcoin and other cryptocurrencies, which was the main driver of the last crypto bull market in 2017, could be due to mainstream media coverage in China, said Mable Jiang, principal at crypto investment firm Multicoin Capital. She pointed out that in the past few days, people in China have bought the market slump.
In a rare report on Sunday, CCTV 2, the state-controlled financial television channel, issued an update on the bitcoin market, claiming the cryptocurrency's return has exceeded 1,300% since March 2020. The stated performance record reflects what is perhaps the most bullish frame of the Bitcoin price surge as it uses last year's lows as a starting point and goes through the most recent all-time high above $ 58,000. But it's not wrong.
The broadcaster's report continued by explaining Bill Gates' changed stance on Bitcoin (he's now neutral instead of negative) and ARK Investment's Cathie Wood's support for Bitcoin.
"As Bitcoin continues to rise, more and more companies have announced that they will consider Bitcoin as part of their asset allocation," said the newscaster at CCTV 2.
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Are you planning to sell bitcoin? Check out China's "Tether Premium" first
Are you planning to sell bitcoin? Check out China's "Tether Premium" first
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+ 11.23%
+ 11.64%
+ 1.55%
+ 0.12%
BTC = X.
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