Getting started with blockchain | USDT off-market price is more than 7 yuan, why is unstable currency unstable?

02 USDT is not very stable

Although it is the stable currency with the largest market share, the USDT has always been unstable. The chart below shows the USDT dollar price curve from January 1, 2018 to April 8 this year:

In theory, because 1:1 is anchored with the US dollar, the price of USDT should be a horizontal straight line , but we can see from the above figure that the actual performance of USDT has been unstable.

So, what are the reasons that may cause the stable USDT to be unstable?

The first factor affecting the price of USDT is the supply and demand relationship of the market. This is easy to understand. When the supply exceeds demand, the USDT premium rate is low or even a negative premium; when the supply exceeds demand, the premium is high.

So, when is the gap between supply and demand likely to be large, that is, the USDT premium rate is obvious? Generally speaking, when the market is hot, the funds outside the market continue to enter the encryption world. As an import, the USDT naturally grows rapidly, and there will be a high premium in the short term. When the market declines sharply, many investors need to convert Token into stable or legal currency for hedging. At this time, depending on the demand changes, USDT may be a premium or a negative premium.

Some platforms offer lending services that can borrow USDT from the platform by collateralizing Token assets. When some projects are hot, some people will choose to borrow USDT from the platform, resulting in a short supply of USDT in the short term.

In addition to supply and demand, some rumors from Tether will also affect USDT prices. For example, on October 15 last year, an article by Bloomberg said that “If the government authorities began investigating Tether’s wrongdoing, USDT would soon lose value.” Due to the news, USDT was sold wildly by investors, and some platforms were short. Dropped 11% in time. On November 2nd, Tether finally announced the deposit certificate issued by the Deltec Bank & Trust Bank of the Bahamas, "positive response" rumors.

03 Summary

Stabilizing coins is a bridge between the real world and the encrypted world, and its importance is self-evident.

The USDT is the stable currency that Tether has issued and has the largest market share, but its price has been not stable. The main influencing factors are supply and demand and rumors about Tether. But in the final analysis, the biggest risk of USDT is that it is essentially a promise of Tether.

Of course, more and more stable coins have emerged in the encryption market, and there are also many TUSD and GUSD with high transparency and legality.

The recent USDT premium mentioned at the beginning of the article is very high. What factors do you think are caused? Feel free to share your opinion in the message area.