Behind the USDT Negative Premium: Bitcoin Pricing Power is Shifting
Produced | Odaily (ID: o-daily)
Produced | Odaily (ID: o-daily)
"Last night I dreamed that USDT was 3.5 yuan." A retail investor told Odaily.
The more USDT is issued, the more investors worry that USDT will be thundered.
Since the "3.12" cryptocurrency market plummeted, the issuer of USDT, Tether, which is often dubbed the "Federal Reserve of the Currency Circle", has begun to flood the issuance of USDT. From March 12 to the present, the total amount of additional issuance is 4.249 billion (including authorized but unissued).
According to Tokenview data analysis, most of the newly issued USDT will eventually flow into mainstream exchanges led by Huobi, Binance and Bitfinex. Buyers may use these USDT for other financial services or transfer them to other exchanges, such as participating in contract transactions, Pledge lending, wealth management and other businesses. In addition, affected by the epidemic, some USDT is used for cross-border payment, international trade remittance, fund transfer, value storage and other out-of-circle needs.
However, the demand for USDT inside and outside the circle still cannot keep up with the speed of USDT issuance. Recently, the negative premium trend of USDT has become more and more obvious. Coin data shows that as of press time, the OTC price of USDT is temporarily quoted at 6.98 yuan, the exchange rate of USD to RMB is 7.1028, and the current premium rate of USDT is -1.72%.
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Since "3.12", a total of 4.249 billion USDT has been issued
Since the "3.12" cryptocurrency market plummeted, USDT has started to issue crazily.
According to Odaily statistics, from March 12 to the present, Tether has issued a total of 57 additional USDTs, from the initial 60 million USDT once to the later 120 million USDT once. Above, the total amount of additional issuance is 4.249 billion (including authorized but unissued).
The market value of USDT hit a record high. According to CoinMarketCap data, the current market value of USDT has reached 8.8 billion US dollars, ranking fourth on the CoinMarketCap market value list, second only to BTC, ETH and XRP.
The sharp increase in the market value of USDT has also directly driven the market value of the entire stablecoin market to exceed 10 billion US dollars, a record high in history.
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Data source: Tokenview
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USDT total circulation trend chart (picture source: DAppTotal)
According to DAppTotal data, since "3.12", the total circulation of USDT has also increased significantly, and the current market circulation supply is 8.79 billion US dollars.
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Who needs such a large amount of USDT?
In general, the additional issuance of USDT during this period is more due to the growing market demand. After the plunge, currency holders exchange Bitcoin back to USDT to hold positions on the sidelines, and investors enter the market to buy bottom, all need stable currency.
According to Tokenview data analysis, most of the newly issued USDT flowed into mainstream exchanges led by Huobi, Binance, and Bitfinex within 24 hours after the money was printed.
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Image source: Beijing Lianan
For Huobi, under the well-developed OTC trading market, users have a strong demand for USDT, while Binance, which is active in on-site transactions, needs USDT to meet user needs. Previously, many large-amount USDT issuances and switching have also been related to Binance related.
Exchanging USDT on these two major exchanges is only the first step for investors. After buying mainstream currencies such as Bitcoin and Ethereum, investors may withdraw the currency to other exchanges or services to participate in businesses such as contract transactions, pledged loans, and wealth management.
In addition, according to Odaily's observations on the market, not only investors in the currency circle are using USDT, but due to factors such as the epidemic, the demand for USDT outside the circle is growing rapidly, and some of the additional USDT is used for cross-border payments and international trade returns Payment, fund transfer, value storage and other scenarios. In other words, USDT continues to go out of the circle.
Frank ling, vice president of Bixin, once said that the additional issuance of USDT has little to do with the currency circle. In March this year, the exchange rate of most currencies except the US dollar against the US created a new low in the past ten years. At this time, in countries with exchange rate controls, The only way people can get dollars is through stablecoins.
Frank ling also revealed that a large number of assets held by some Iranian mine owners are USDT and BTC.
Liu Fei, CEO of Bixin Mining, also told Odaily that a lot of USDT issued in the market is currently used for cross-border payment and trade settlement. "Affected by the epidemic, international settlement is very inconvenient. All need to come back through USDT. The money could have flowed back through traditional trade routes. Now (traditional routes) can’t go through, USDT has become a good way.”
He also gave an example that many trade remittances in Southeast Asia and Brazil are being settled through USDT.
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The negative premium of USDT is obvious, and the pricing power of BTC may be taken away by large overseas institutions
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Image source: Beijing Lianan
With the decline of the exchange rate of RMB against the US dollar in recent days, the negative premium of USDT has exceeded 1% in recent days. Coin data shows that as of press time, the USDT off-site price is temporarily quoted at 6.98 yuan, the exchange rate of the US dollar to the RMB is 7.1028, and the current premium rate of USDT is -1.72%.
It can also be clearly seen from the following two graphs that the premium rate of USDT has continued to decline in the past 7 days.
This has seriously shrunk the assets of investors who hold a large amount of USDT. Some people in the currency circle joked about this: even if they hold USDT in short positions, they cannot escape the fate of being cut off, and they nicknamed it "cutting short positions".
Odaily has noticed that some retail investors have begun to sell their USDT or switch to other mainstream currencies or stable currencies to avoid risks.
Obviously, the continuous negative premium of USDT is related to the oversupply of USDT. Although investors' demand for USDT is higher than before, the current cryptocurrency market still cannot consume so much USDT.
The two main settlement units of Bitcoin are the U.S. dollar and USDT (in fact, it can be understood as RMB). In the current market, the exchange settled in US dollars is mainly Coinbase in the United States, which allows users to recharge directly with legal currency. Other large exchanges usually settle in USDT, such as Binance, Huobi, OKEx, etc., which are currency-to-currency transactions, which need to be converted into USDT over-the-counter (OTC) and then deposited into the exchange. According to the Chainalysis report, due to factors such as the general environment, 99% of bitcoin spot transactions in China are settled in USDT. USDT is the main channel for RMB deposits and withdrawals, that is, the main trading market for USDT is in China.
Therefore, from the perspective of the domestic market, the negative premium of RMB against USDT can be understood as the flight of RMB funds to a certain extent.
On a deeper level, USDT's negative premium is also an indirect result of overseas buyers' aggressive buying of BTC.
When there are continuous funds to buy BTC in the overseas market, the price of Bitcoin in the US dollar market will be higher than that in the USDT market, which is why BTC on overseas exchanges led by Coinbase has a different degree of premium some time ago. At this time, overseas market institutions began to act, including some international brick-moving parties. They will use USDT to buy BTC, then transfer to the U.S. dollar market to exchange for U.S. dollars, and finally use U.S. dollars to Tether to exchange for USDT, such a circular arbitrage. During this process, USDT has continuously flowed out from Tether, and the final result is that the supply of USDT in the market exceeds the demand.
As for how long this negative premium will last, the interviewees did not give a specific answer. Weibo big V Fahai (fhrp) believes that this negative premium may last for quite a while.
Senior practitioner Yang Hao (pseudonym) told Odaily that the previous logic of USDT’s additional issuance did come from the deposit demand of large overseas institutions. After the “3.12” cryptocurrency market plummeted, several traditional financial institutions in New York State deposited funds to Tether through SPV companies. (Traditional financial institutions in New York State cannot directly trade with Tether), recharge US dollars to exchange USDT, and then go to our domestic exchanges to buy BTC. Because the price of USDT OTC on domestic exchanges was generally at a positive premium at that time, these large overseas institutions bought more BTC at a price of $1, and the number of BTC purchased was between 600,000 and 700,000. In the end, BTC was bought overseas. In the hands of investors, USDT remains in the pockets of Chinese investors.
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Image source: Beatle News
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Mainstream exchange wallet BTC balance trend chart (picture source: glassnode)
In the past year, the BTC balances of Huobi and OKEx have both dropped by 10%, and Binance has dropped by 60%. However, the BTC balance of Coinbase, an overseas compliance exchange, has shown a slight increase.
This also shows that the BTC in domestic exchanges is flowing out, and the BTC in the hands of domestic investors is being exchanged for low-priced chips by overseas "giant whales".
However, Yang Hao believes that the USDT negative premium this time does not reflect the flight of funds in the market, but because there are too many USDTs in the market at present; and a large amount of USDT is in Asia, and Asian investors began to sell their USDT and buy BTC. Or other mainstream assets such as ETH to avoid risks.
However, for these large overseas institutions, they are not worried about the risk of thunderstorms in USDT, because the moment they get USDT, they have already exchanged USDT for BTC, and when the time is right, they will exchange it to Tether for US dollars through SPV. Once there is a thunderstorm in USDT, domestic investors start to sell USDT in a panic and replace it with fiat currency or BTC. The power will naturally fall into the hands of these large overseas institutions.
Yang Hao also told Odaily that there is a big contrast between domestic and foreign market sentiments. There is a thriving scene on Twitter. Overseas institutions are bullish, while many domestic institutions and miners are talking empty. Yang Hao revealed that many miner customers are selling bitcoins. This made Yang Hao feel powerless, "The bitcoins that we dug out through our own hard work were bought by overseas investors at a low price (starting to buy from 5,000 USDT), just like the cotton market in the past. China, but in the end there is no pricing power, so the pricing power of Bitcoin is handed over to others.”
Finally, Yang Hao also called on domestic investors and miners to "hoard coins for the country and mine for the country".
References:
References:
Beijing Lianan: "Data on ChainsMap: more than 1.3 billion additional USDT issued in a single month, where did all these USDT go? "
Beijing Lianan: "Analysis of ERC20 USDT Additional Issuance: More than 1 Billion Issuance, Most of them Flow into Binance"
