Who is buying USDT and who supports the price of Bitcoin?
This article comes fromDecrypto, original author: Colin Haper
Odaily Translator |
Odaily Translator |
If there is a stablecoin that is Bitcoin's "favorite", it may be Tether.
However, some people have always believed that the Tether stable currency does not have enough endorsements, so it has also caused a lot of controversy in the cryptocurrency industry. But this does not seem to be the case. According to a recent market research report released by Sino Capital (Hanquan Consulting), Tether seems to have great demand in China. Next, let Mr. Odaily (WeChat: o-daily) and everyone try to answer the most difficult question faced by Bitcoin advocates - who bought the Tether that supports Bitcoin?
In fact, the Sino Capital report seems to have given the answer to this question, that is, some of Tether’s supporters may be Chinese investors.
This explanation helps address some criticism of USDT in the market: previous academic papers claimed that Tether manipulated the 2017 bull market because Tether (USDT) was created by its eponymous parent company (which allegedly holds a quarter of USDT). Three Tether reserves), and almost all tokens will be transferred to the Bitfinex exchange. When the price of bitcoin falls, Bitfinex and other exchanges will use Tether to purchase bitcoin in a coordinated manner, and Tether company is simply " Printing" USDT without any real buyers, driving up the price of Bitcoin.
But is this really the case? According to the analysis of the Sino Capital report, one of the reasons that affects the continuous issuance of Tether is that a large number of domestic buyers will use OTC trading platforms to purchase USDT. The company's CEO, Matthew Graham, made two important points:
1. The over-the-counter trading of cryptocurrencies has a huge market in China, far beyond people's imagination;
2. USDT is the key crux of over-the-counter cryptocurrency transactions.
Since 2020, Tether has issued an additional USD 5 billion worth of USDT in the cryptocurrency market, and its current total market value has reached USD 9 billion, more than 10 times that of any other stable currency. According to preliminary estimates, most of Tether's demand comes from at least 100,000 domestic retail cryptocurrency investors and institutional investors, because without USDT, they probably cannot enter the cryptocurrency market and cannot handle trading pairs.
The Sino Capital report states:
Not only that, Sino Capital pointed out in the report that Bitcoin may have some legal gray areas in China. First of all, according to the draft of the General Principles of the Civil Law, online virtual property and data information will officially become rights, which also means that digital currency represented by Bitcoin, virtual currency represented by online game currency, and data information represented by big data will be officially recognized. as the object of civil rights. There are two items in the draft that involve network virtual property and data information. Article 111: Things include immovable property and movable property. Where the law stipulates specific rights or network virtual property as the object of real rights, follow its provisions. Article 108, paragraph 2, item 8 of the draft: (intellectual property rights include) data information. But at the same time, bitcoin is banned from trading domestically, so many cryptocurrency exchanges have moved their services to other jurisdictions. In addition, since 2018, domestic users have not been allowed to use overseas cryptocurrency services, and banks have also been prohibited from opening accounts for cryptocurrency exchanges.
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So the question is, how do domestic investors use Tether?
Perhaps this is one of the reasons for the emergence of USDT, a stablecoin that is well-suited to serving crypto customers who have been shut out by banks and regulators, as USDT is highly liquid and already trades with quite a few Southeast Asian cryptocurrencies Integrated to support license-free transaction services.
Generally speaking, OTC trading platforms will distribute Tether, which is a brokerage model that seems to be more popular in the domestic market at present, and it is also a way for retail investors to enter the restricted market. Depending on operations, these OTC exchanges will either match buyers with sellers in the country's highly networked, tightly-connected crypto economy, or provide liquidity on their own.
An anonymous employee of an over-the-counter trading platform confirmed the findings of the Sino Capital report in an interview with foreign media. The employee said that from a technical point of view, it is not illegal to use yuan to trade bitcoin, but if someone does it, they bank accounts will be locked and may even be closed. However, the employee admitted frankly that the use of USDT to trade Bitcoin cannot be said to be completely legal, but at least it is acceptable.
“Over-the-counter traders seem to be an ‘open secret’, especially those involving USDT. This is a relatively sensitive topic, but it is also a consensus in the domestic encryption community.”
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The role and effect of OTC trading in China
The anonymous OTC employee mentioned above said his company currently has about 100 large clients who trade more than $5 billion a year, depending on bitcoin price trends. Not only that, but the employee also revealed that many OTC customers also have accounts with cryptocurrency-friendly banks in Western countries, including Silvergate and Deltec (the latter is also the bank used by Tether in the Bahamas).
The cryptocurrency over-the-counter market has also established relationships with several overseas exchange brokerage service providers that provide liquidity for encrypted assets. Since there is a business relationship between these two types of entities, it can help cryptocurrency retail investors and institutions invest Or buy stablecoins directly from Tether.
Sino Capital emphasized in the report that although some gray areas do not seem to be illegal, there may still be many potential risks in "dancing" in these areas, but some large OTC trading institutions seem to have mastered the industry Necessary steps to gain a foothold within. Matthew Graham explained:
“Cryptocurrency over-the-counter trading services vary in professional level and scale. In addition, there are many different types of legal gray areas in China. For venue trading service platforms with higher professional levels, they usually cater to some giant whales. For traders, such as high-net-worth individuals and institutional investors, these large-scale trading services are generally facilitated on Signal and Telegram. Although this is a gray area, it is undeniable that there are certain economic advantages and business development. It's booming."
“For the other end of the over-the-counter cryptocurrency market — retail investors — this service makes it easier for them to buy cryptocurrencies because those exchanges basically fly under the regulatory radar as well, and some of the smaller Account holders can trade cryptocurrencies directly through the over-the-counter trading service of the cryptocurrency exchange, and then use Alipay, WeChat or bank wire to make payment."
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"A game of cat and mouse"
Also according to the anonymous employee of the OTC trading service platform mentioned above, the current average purchase fee for Tether is about 10,000 yuan (about 1,400 US dollars based on the current exchange rate). Over the past year, the OTC brokerage service provider has seen a 300% surge in the number of clients.
Presumably, this trend is common among the six domestic cryptocurrency exchanges that offer over-the-counter trading services. And, according to a report by Sino Capital and data from Chainalysis, this trend may only have emerged after the implementation of the cryptocurrency trading ban, and it is under the influence of this ban that more and more domestic Bitcoin " Trading Machines" started using Tether.
According to Sino Capital's report, most USDT transactions are completed through word of mouth, recommendation, etc. From this situation, some instant messaging application platforms provide channels for communication between users.
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"Suppressing" Bitcoin Price?
Sino Capital CEO Matthew Graham further stated:
“Our OTC platform sources estimate that around 100,000 retail investors participated in Tether and Bitcoin swaps, and while the exact number is difficult to directly verify, this estimate is not surprising at all.”
The Sino Capital report also states:
“Some of the smartest and most successful traders in the country are also usually the most low-key, which is why no one has publicly talked about buying Tether so far; it’s not because Bitfinex/Tether is putting unsecured USDT on the market, but Because those who trade Tether don’t really want anyone (mostly regulators) to know.”
So don't expect domestic USDT buying pressure to stop anytime soon until bitcoin/fiat trading is legal.
However, if you thought Tether's connection to Bitcoin would drive up Bitcoin's price, you might not. Matthew Graham explains:
