The data tells you that USDT is the opportunity for ordinary people in the currency circle

Editor's Note: This article comes fromCurrency BondEditor's Note: This article comes from

Currency Bond

(ID: BitBond007), Author: Intelligence Officer, reproduced by Odaily with authorization.

The skyrocketing price of Bitcoin, the emergence of 100-fold coins, and the income of futures contracts can be 100-1000-1000 times, but it is accompanied by huge risks at any time: liquidation, being cut off, returning to zero...Except for the occasional 100-fold coins that are difficult to catch, ordinary people are more likely to grasp opportunities, perhaps in arbitrage with lower risks and more stable returns.For example, risk-free futures and spot arbitrage is a good opportunity when the futures spot price difference in June reaches a maximum of 1,000 knives;

"Daily income of 100,000, hit the OTC trading group directly"

After the end of this article, I hope to answer one of the most important questions - the reason for the USDT premium?

USDT profile

Why did the attack by the New York Prosecutor's Office have little effect on it?

Tether USD is the full name of USDT, and its Chinese name is TEDA. The issuer Tether listed USDT on Bitfinex and Poloniex in 2015. As a stable currency, Tether promises that there is one dollar worth of cash or equivalent behind each USDT to support the value of USDT.

However, it is estimated that this matter will have little impact on USDT. It should be because Tether is a company registered in Canada, and the main users of USDT are in the Asian market, and Americans hardly use it. Therefore, the US ban will not bring much impact to USDT. Influence.

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▲ 24H bitcoin stablecoin transaction volume ratio, USDT is far ahead

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(Data source: CryptoCompare)

The role of USDT on the currency market is indisputable.

This is why the market has never stopped accusing Tether, because theoretically speaking, this company controls the lifeblood of the digital currency world. Once economic interests are involved, Tether has the motive to do evil.

Yesterday, Tether announced that it will issue USDT on Algorand in the future. Prior to this, Tether has issued USDT on Bitcoin, Ethereum, and Tron. The following table shows the current market value of USDT on major public chains.

▲ USDT issued based on each protocol

The USDT issued on the Bitcoin blockchain through the OMINI protocol still occupies the largest market value, with a current market value of more than 2.5 billion US dollars; while the market value of USDT issued on the Ethereum based on the ERC-20 protocol is second, with a market value of 1.4 billion US dollars; Finally, there is the USDT issued on TRON based on the TRC-20 protocol that has only recently started. The market value of circulation is currently less than 100 million US dollars. As an important part of market liquidity, slow transfer speed and high transfer fees are not conducive to the stability of liquidity, so Tether will relocate USDT to TRON with higher efficiency in the future. (not for any other reason)

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▲ The USDT discount and premium index fluctuates around 100

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(Data source: ChaiNext)

The USDT on-market discount index is calculated by ChaiNext based on the off-market price of USDT and the offshore RMB exchange rate. It is the percentage ratio between USDT and USD, reflecting the degree of congestion of funds entering and exiting the token market.

When the index is 100, it means USDT parity, when the index is greater than 100, it means USDT premium, and if it is less than 100, it means USDT discount.

The USDT discount and premium index reflects a certain period of time to a certain extent, whether the market is dominated by the Asian market or the US dollar market. Because digital currency is a global, non-single market, the sources of liquidity are mainly US dollars, USDT, Japanese yen, etc. Since USDT is a mirror image of the U.S. dollar, price fluctuations are basically determined only by the digital currency market.

Conversely, when the demand for Bitcoin in the USDT market increases, it will appear as a negative premium for Bitcoin in the US dollar market to Bitcoin in the USDT market. At this time, the market spontaneously moved bitcoins from the US dollar market to the USDT market for sale, and at the same time exchanged the USDT obtained from selling bitcoins for US dollars.

The on-site USDT index deviates from 100 for a long time, and stays below 100 most of the time, and the deviation is large. This is likely to show that USDT has been "puffy" during this period, and the market trend is basically determined by the external market, or it is the discount of the market's lack of confidence in USDT.

▲The impact of additional issuance of USDT on the price of Bitcoin

The above table is a very popular method in the market to count the impact of previous USDT issuances on the price of Bitcoin. It seems that they all come to the same conclusion, that is, the additional issuance of USDT has a positive effect on the price of Bitcoin. It is true that the additional issuance of USDT indicates that there is a demand for deposits in the market, which, logically speaking, has a positive impact on the price of Bitcoin. However, this statistical method actually hides an inappropriate logic, that is, Tether can predict the market in advance. Obviously this kind of logic is incorrect, and the author believes that this issue should be viewed from the perspective of market liquidity.

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▲ Bitcoin K-line chart (blue is the USDT issuance date mark)

It is much more reasonable to look at the additional issuance and destruction of USDT from the perspective of liquidity, that is, Tether needs to control the additional issuance and destruction of USDT to ensure that the price of USDT does not deviate too much from USD.

USDT supply and demand

How to arbitrage correctly?

The supply of USDT is completely controlled by Tether according to the market demand, and the market demand mainly includes providing transaction demand, wealth management demand, etc. Trading demand is reflected by liquidity indicators, including price, trading volume, turnover rate, etc.

It should be noted that from the perspective of the business model, Tether will tend to make the supply of USDT slightly larger than the actual demand of the market, but its price will definitely return to the US dollar. Therefore, when the price of USDT is lower than the US dollar by more than 1%, you can buy it, and sell it after its price returns to or approaches the US dollar.

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▲ USDT OTC price changes, fluctuating between 6.22~7.59

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(Source: Huobi Global)

The picture above shows the price changes of Huobi USDT over-the-counter transactions. It can be seen that the price of USDT fluctuates very frequently, and the fluctuations occur almost every week.

We assume that the buying and selling of USDT is completed every two weeks, and the profit is 1% each time, then assuming that 25 operations are completed in one year, the annualized conversion can reach 28%. In fact, in the case of large market fluctuations, this frequency may increase upwards.

Trading volume and turnover rate are related, and the USDT turnover rate can be calculated by dividing the trading volume by the market value of USDT. The turnover rate of USDT reflects the heat of the market, and abnormal liquidity will occur if the turnover rate is too high or too low.

In addition to the transaction needs of USDT, there is also a need for financial management. Financial needs currently mainly include leveraged lending and US dollar demand. In some foreign exchange control countries, the purpose of indirectly buying U.S. dollars can be achieved by buying USDT, which is more obvious in inflationary periods. There are two types of USDT leveraged lending, one is to borrow currency and add leverage to meet transaction needs; the other is to lend currency, mainly for financial management needs.

At present, the annualization of all kinds of USDT's financial management is basically above 12%, which is unimaginable in the traditional financial circle. Only the thunderous P2P can compete with it.

And this is the wild digital currency market, full of dangers and opportunities just like when the American continent was just discovered.

After experiencing thunderstorm incidents and judicial crises, USDT once again still affects the market with a huge market share. This begs the question, if trust is not the most important quality a stablecoin needs, then what is?

In the foreseeable future, in the face of the central bank's digital currency in the foreseeable future, USDT, which has a first-mover advantage, will continue to carry the banner of currency market liquidity.

What about Libra?

It's not a question of whether you want it, but a question of whether you can.

Two days ago, Marcus, the head of Libra, accepted the continuous "whipping" of the US Senate and House of Representatives. From the two-day meeting, it can be seen that the attitude of the US government towards digital currency is divided into two factions. One faction chooses to ignore it. The attitude is strict, and the privacy scandals linked to Facebook have fired on Marcus one after another; the other is the innovative faction, who regards Libra as an innovative product of technology and finance, and worries that a strict attitude will make new things aborted.

Marcus still has to navigate it. But what is certain is that once Libra is approved, the Libra Alliance has no reason not to allow Libra to enter the digital currency market. For these new investors brought into the market by Libra, it will be a normal operation to use Libra with lower friction costs to purchase digital currency. New markets will swallow up old markets.