Behind the USDT skyrocket: premium, arbitrage and competing

USDT is crazy.” At 6 o'clock on the morning of April 8, the currency citizen Xiao Ce said in the group, with a smile that was not smiling, “(USDT) 7.03 (yuan).”

In the past month, the USDT has risen from a minimum of 6.76 yuan to 7.03 yuan this morning, an increase of 4%.

At this moment, if the buyer buys USDT with the dollar anchorage on the OTC platform, the lowest selling price is found to be 7.08 yuan, which is about 5.3% higher than the US dollar against the RMB exchange rate (6.72:1), ie the premium rate. 5.3%.

4%, 5.3% is insignificant and worth mentioning in the digital concept of the blockchain world, which is worth a thousand times and a hundred times. But when this figure is reflected in the USDT positioned as a stable currency, it is enough to attract everyone's attention. .

The Odaily Planet Daily study found that behind the surge in USDT, it was mainly the entry of domestic funds, in addition to an arbitrage industry chain.

At the same time, because of the growth of the stable currency market, blockchain groups such as Firecoin, OKex, and Blockstream are gradually entering the stable currency, with the intention of dividing up a piece of cake.

Stabilizing coins are unstable

"Is the bull market coming?"

Early in the morning of April 8, Xiao Ce exclaimed in a digital currency research group. He threw a screenshot of the USDT bought on the OTC platform of an exchange. The screenshot shows that the USDT price is fixed at 7.08 yuan and the premium rate is 5.3%.

The argument given by Xiao Ce is that the premium indicates that USDT entered the seller's market, and this situation has been staged several times in the previous bull market.

The market is recovering.

According to the TradingView data, the total market value of cryptocurrencies on April 8 was nearly $180 billion, the highest since November 2018.

“USDT is considered the touchstone of the market.” A digital currency analyst who declined to be named said that the reason is related to the laws of the past market.

In January last year, when Bitcoin prices stayed at $17,000, USDT had reached the highest price: $7.77.

According to non-small data, in the fourth quarter of last year, when the currency market became cold, the market capitalization of USDT fell from $2.8 billion to a minimum of $1.676 billion. Today, this number has recovered to $2.134 billion.

However, unlike the USDT's high price and enthusiasm for the renminbi, according to non-small data, the US dollar has remained stable to within 1% of the USDT in the past month.

The premium of the RMB to USDT is high and is understood as the entry of new RMB funds. “Investors can't wait to buy USDT to invest in other virtual currencies through legal currency,” explains Xiao Ce.

In addition, snapping up GT cards has become a hot topic in the blockchain world. "The USDT surge may also be caused by the purchase of the platform currency of Gate.io." Investor Zhuang Cheng said.

At 12 o'clock on April 8th, Beijing time, the cryptocurrency exchange Gate.io launched the GT distribution plan. In short, it uses the USDT equivalent to purchase the card package and obtain the corresponding GT.

On this day, Gate.io plans to distribute 40 million GTs and raise 160 million USDTs.

This is considered to be the cause of the skyrocketing USDT in this round.

But regardless of whether Gate.io is the “culprit” behind it, the USDT premium represents the entry of domestic incremental funds.

For the USDT skyrocketing, Pan Chao, head of MakerDAO China, explained: “Because of the platform currency of the exchange, there have been a lot of funds recently.”

The premium of the USDT also led to arbitrage. A quantitative person who did not want to be named revealed that many of the quantitative teams around him are converting to USDT for 1:1, and then using USDT for RMB or other virtual currency, because the 5% premium rate is directly converted into profitability.

Seize the stable currency market

In the past year, almost all the blockchain companies that have become famous have announced their expansion into stable currency.

Last August, Terra, a stable currency project launched by South Korea's e-commerce platform TMON, received $32 million in seed round financing. It is rare among investors that there are three major exchanges in China, such as currency security, fire money, and Okex.

In October last year, Firecoin announced the launch of the stable currency integrated solution HUSD. In January of this year, the fire currency was again passed to launch stable coins.

On January 23 this year, according to finextra, blockstream infrastructure company Blockstream is working with Japanese technology company Digital Garage and FS company Tokyo Tanshi to form a joint venture, the first of them. The project is a stable currency linked to the yen.

On March 5th, USDT issuer Tether announced that it has entered into cooperation with the Wavefield Foundation and is expected to launch the USDT in line with the TRC-20 technical standard in the wave field chain in the second quarter of this year.

On March 28th, OK Group announced the launch of the stable currency OKUSD. The US trust Prime Trust announced on its official website that OK Group has completed a strategic investment in Prime Trust. In the future, both parties will jointly launch OKChain-based stable currency OKUSD.

At the same time, a member of the BCH community told Odaily Planet Daily that BCH also plans to launch a BCH-based stable currency project in the near future. “The rapid expansion of the stable currency market is the basis of the bull market”.

Even the financial giant JP Morgan Chase announced on February 14 this year a JPMCoin similar to stable currency.

In fact, on the other hand, stable coins ignore the bulls and bears, which is reflected in the price of stable coins and the profit model.

On September 10 last year, the New York Financial Services Authority approved the stable currency Gemini Dollar (GUSD) and Paxos Standard (PAX), and the regulated stable currency was born. In just one month, more than 10 kinds of stable coins broke out in the world, causing a wave in the bear market.

The issue of stable currency was understood by Mikko as a financing act. Mikko is the author of the Handbook of Stable Digital Money. He has publicly stated that ICO is like equity financing, and stable currency is similar to debt financing.

Regarding the profit model of stable currency, Pan Chao introduced that USDT's revenue model is not the public understanding of mortgage interest and transfer fees. The bulk of the transaction is the transaction fee of the exchange itself. “USDT can drive transactions, exchange fees in Bitfinex. It’s the USDT income.”

It is also the intention that the exchanges have entered the stable currency. Pan Chao introduced that trading all the funds in stock, you can set up a new trading pair, which is the advantage of their entry into the stable currency.

Competitive market

How big is the stable currency market?

In December last year, Xinzhuo Capital Executive General Wang Zhuo said in an interview with Odaily Planet Daily that the stable currency market would be a market worth hundreds of billions of dollars.

"The stable currency has completely turned over this year. There have been many misunderstandings about the stable currency, or no one cares at all. In the first half of the year, I told people that the stable currency is very valuable. As a result, someone asked me, this thing can not be speculated. What did he do? As a result, after Gemini and Pax came out, everyone wanted to do it.” Wang Zhuo said.

Pan Chao also said that there are two main modes of stable currency in the market: legal currency mortgage and digital asset mortgage. The USDT issued by TEDA belongs to the former and provides virtual digital assets access to gold. The current market value is 2.2 billion US dollars, while the latter It can chain assets such as gold, which is the currency inside the blockchain. Like the legal currency market, it will be a trillion market.

On the other hand, most of the stable currencies that belong to the legal currency mortgage type have not been recognized by the blockchain world, because the preconditions and currency of the stable currency are generally the same, requiring solvency, liquidity and credit endorsement. The issuer must act like a bank in a traditional financial market, violating the decentralization of the blockchain.

In addition, stable currencies have been questioned as not stable enough due to insufficient capital reserves, authenticity of reserves and fluctuations in collateral prices.

On December 17, last year, the total market value of USDT rose to fourth place, and everyone was criticized for “centralized currency to exceed decentralized currency”.

Pan Chao said that the current stable currency in the market is still a competitive market. The legal currency mortgage and digital asset mortgage are not completely competitive. The digital mortgage-type stable currency has not reached saturation.

According to data provided by InVault, as of February this year, there were 54 stable coins, 45% of which were active.

Interestingly, stable currency based on fiat currency is seeking recognition from national regulators.

For example, the joint venture called Crypto Garage, which is called Blockstream, has been officially authorized by Japan to launch the first blockchain financing project under the sandbox of Japanese regulators.

On the other hand, in October last year, according to Bitcoin, the Financial Services Authority (FSA), Japan's top financial regulator, said: "In principle, according to the "Payment Services Act," stable currencies linked by fiat currencies are not "virtual currencies." The law also has specific registration requirements for its issuers and traders."

On the evening of the 8th, USDT was falling, and the USDT price on the major OTC platforms fell back to 6.95 yuan, a decrease of 1.1% compared with 7.03 yuan in the morning.

"By arbitrage and other means, the USDT market is unsustainable, and the premium is only a short-term phenomenon." Pan Chao said.

Source: Planet Daily

Author: Dave