Definition of USDT OTC premium

Theoretically, the price of USDT is equal to the price of the US dollar. But in reality, the price of USDT will always be higher or lower than the price of USD. This is the so-called premium.

The USDT OTC premium is the ratio between the OTC price and the US dollar price. The market price is affected by the relationship between supply and demand, so when the purchase demand for crypto assets increases excessively, this indicator will often be higher than 100%, that is, a positive premium will appear; conversely, when market demand is weak, the market price of USDT will be low, that is, Negative premium.

Impact of USDT OTC Premium

USDT OTC premium is not just an indicator, it can also reflect the actual situation of the market and have an impact on the market. A positive premium usually drives up the price of mainstream currencies, while reducing the number of people who sell USDT and withdraw cash, which is good for the market, and OTC funds are entering the market. On the contrary, negative premiums are generally negative for the market and can lead to large outflows from the market.

Therefore, the USDT OTC premium can reflect the retail purchase volume of crypto assets and is a reference for short-term market capital volume and activity.

USDT price stabilization mechanism

In order to achieve the goal of USDT maintaining stability, Tether has taken some measures:

First of all, USDT is linked to the US dollar in the real world and can be exchanged 1:1. Therefore, when the premium is large, the market will carry out arbitrage, thereby pushing the price back to stability.

Second, Tether will stabilize the price by adjusting the supply of USDT. Under normal circumstances, when USDT is at a positive premium, a large amount of USDT will be transferred out of the Tether account, and the market will interpret it as "additional issuance". Conversely, when USDT has a negative premium for a period of time, Tether will recycle and destroy a part of USDT to maintain market balance.

In general, the USDT OTC premium not only reflects market conditions, but also has an impact on the market. Historical data shows that in a bull market, USDT's OTC premium is usually positive; in a bear market, USDT's OTC premium is usually negative.

However, whether a positive premium or a negative premium is a normal fluctuation of the market, investors should consider a variety of factors when making decisions, including fundamentals, technical indicators, and the economic situation.