Is the new hype around Chinese stocks putting crypto and USDT at risk
Chinese stocks have bounced back strongly after a long period of weakness.
After a long period of weakness, Chinese stocks have rebounded strongly. But that could spell trouble for the crypto market, and especially for USDT.
Despite the 2021 crackdown on crypto trading, many Chinese investors continued to trade through offshore accounts and exchanges. Now, many appear to be turning away from crypto and focusing on China’s thriving stock market.
Background: The Chinese government has recently announced, among other things, rate cuts, the freeing of cash at banks, and billions in liquidity support for the stock and real estate markets announced. As a result, prices of many Chinese stocks have surged. For example, the broad market index "MSCI China A" rose by nearly 50% versus the prior month, far outpacing the crypto market.
In addition to potential liquidity draining from the crypto market, USDT (Tether’s stablecoin) faces another challenge. Since late September, USDT has traded at a small discount to the U.S. dollar.
"If traders rush to convert their crypto to fiat, you can infer they’re panicking and buying Chinese stocks," says Livio Weng, CEO of Hong Kong-based crypto exchange Hashkey.
Because there are no USDT/Yuan trading pairs on crypto exchanges, the U.S. dollar has effectively become the benchmark for trading activity, according to Kaiko. The small discount on USDT points to higher demand for dollars and selling pressure on USDT.
Currently, the Tether token is trading at $0.9995, slightly below parity. USDT’s daily trading volume stands at $58 billion, exceeding even Bitcoin and Ethereum trading.
