On Wednesday (October 9), USDT/USD "decoupled" and fell to 0.9994. Institutional reports pointed out that the discount coincided with the Chinese central bank taking a series of easing measures. The Chinese central bank and the Ministry of Finance held their first joint economic meeting. The Chinese over-the-counter trading platform on the Binance exchange showed that the USDT/RMB "negative premium" fell in the 6.78-6.98 yuan range, which in turn impacted Bitcoin buying.
USDT/USD appears to be "decoupled"
According to a report by The Daily HODL citing US media, since the end of September, the trading price of USDT has sometimes been lower than the value of the US dollar.
Stablecoins are typically pegged 1:1 to the U.S. dollar or other assets.
Normally, USDT/USD may experience a slight price slippage, but looking at the market performance on Wednesday, USDT/USD once fell to 0.9992.
Binance OTC: USDT/CNY flashes a “negative premium”
Bloomberg reported that although China banned cryptocurrency trading in 2021, many Chinese residents continued to use overseas accounts and exchanges to buy and sell digital currencies, partly to avoid capital controls and transfer assets overseas.
Dessislava Aubert, senior research analyst at blockchain data company Kaiko, said that since the end of September, the USDT launched by stablecoin issuer Tether has sometimes traded at a discount to the US dollar. The discount coincided with a series of easing measures taken by the Chinese central bank to curb the deteriorating economic outlook, which led to a surge in A-share prices.
Stablecoins, also known as stablecoins, are cryptocurrencies pegged to fiat currencies, with their value usually pegged 1:1 to an asset such as the U.S. dollar. They are used for trading and as a hedge against the price volatility that often occurs in tokens such as Bitcoin.
“If traders are rushing to convert back to fiat, it can be inferred that they are panic buying Chinese stocks,” said Livio Weng, CEO of Hong Kong-based cryptocurrency exchange Hashkey.
Kaiko's Aubert said that due to the ban, there is no USDT/CNY trading pair on cryptocurrency exchanges, which makes the U.S. dollar the de facto barometer for measuring activity. The slight discount indicates an increase in demand for the dollar and an increase in selling of USDT.
While it is difficult to measure how much of the selling pressure on USDT comes from Chinese investors on exchanges, the picture is clearer on other platforms. Binance OTC trading platform shows that Chinese yuan merchants are offering USDT between 6.78 and 6.98 yuan over the counter, while USD/CNH is 7.07 yuan on the traditional currency market.
USDT premium refers to the market price of USDT being higher or lower than the market price of its real dollar. Usually, a "negative premium" means greater market selling pressure. The negative premium phenomenon of USDT usually occurs when market demand decreases or liquidity is limited. The market believes that this may be related to speculative traders wanting to sell USDT and turn to A-shares. The discounted sale of USDT is to raise RMB funds faster, which leads to a negative premium due to price drops.
“We can see a correlation with onshore A-share trading demand,” said Annabelle Huang, managing partner at digital asset investment firm Amber Group in Singapore. Some brokerages even opened during China’s recent Golden Week holiday to “attract new clients,” she said.
The demand isn’t just being driven by retail investors, said Laura Vidiella del Blanco, head of business development and strategy at cryptocurrency hedge fund MNNC Group in New York, adding that some of the firm’s institutional investors are shifting allocations toward Chinese stocks.
“Most of these (Chinese stocks) are Asian allocators who are familiar with the market and have multiple strategies besides digital assets,” he said.
Chinese over-the-counter brokers have attracted “unprecedented” inflows this year, according to estimates by blockchain intelligence firm Chainalysis Inc., suggesting that demand for cryptocurrencies among Chinese investors remains strong despite the ongoing ban.
“Maybe this is the first time people want the National Day holiday to be shorter, which is quite an incredible move,” said Amber’s Huang.
The USDT/USD discount and USDT/RMB negative premium triggered panic buying of Bitcoin.
China's central bank and the Ministry of Finance hold their first joint economic meeting
China’s central bank and the Ministry of Finance held their first joint working group meeting on treasury bond trading, a sign of closer coordination between monetary and fiscal policies as Beijing strives to achieve its economic growth target of “around 5%”, according to a report in Hong Kong (SCMP).
The two sides also exchanged views on the development of China's bond market and pledged to provide an "appropriate environment" for government bond trading, according to a statement released by the People's Bank of China (China's central bank) on Wednesday.
Speculation of more fiscal stimulus came after China’s central bank announced a bigger-than-expected rate cut in late September, while top leaders pledged at a Politburo meeting to coordinate policy measures to stabilize economic growth.
In addition, China's Ministry of Finance will hold a press conference on Saturday to introduce its work on strengthening countercyclical regulation of fiscal policy to promote economic development.
The market expects Finance Minister Ram Phoan to brief the media and answer questions.
China is also issuing more long-term government bonds to finance its economy.
Bitcoin Technical Analysis
FXStreet analyst Manish Chhetri said that the price of Bitcoin found support near the 200-day exponential moving average (EMA) at around $60,000. It then rose 3.5% over the next four days, breaking through the resistance level of $62,125. As of Wednesday, Bitcoin was trading just above $62,000.
If Bitcoin breaks out and closes below $62,125, it could extend its decline and retest its 200-day exponential moving average at $60,030.
The relative strength index (RSI) is hovering around the neutral level of 50, indicating a lack of momentum and indecision among traders. If the RSI drops below the neutral level, it would indicate weak momentum, leading to a drop in Bitcoin price.
However, if the $62,125 level holds, Bitcoin could rise to retest its $66,000 psychological level.
