USDT slips below $1 as Chinese investors turn to stocks
Tether (CRYPTO:USDT), a stablecoin in the cryptocurrency market with a capitalisation of nearly $120 billion, has been trading below its dollar peg since September 30.
This slight depeg is attributed to a shift in investment focus by Chinese investors, who are increasingly turning to the domestic stock market in response to China’s recent economic stimulus measures.
USDT’s price drop, though minimal, has raised questions about the cause of the downward pressure.
Analysts suggest that the stablecoin is facing reduced demand as Chinese investors, who typically use USDT to participate in crypto trading, are now selling off their holdings to capitalise on a booming stock market.
According to reports, these investors are willing to pay conversion fees ranging from 3% to 5% to exchange USDT for yuan despite the stablecoin’s price falling slightly below $1.
China recently announced one of its largest stimulus packages since the pandemic, aimed at boosting the economy.
These measures include lowering the reserve requirements for banks and increasing credit availability.
Additionally, the government has committed $28 billion for various projects.
The result has been a 20% rally in China’s stock market, drawing in investors from different sectors, including those traditionally involved in cryptocurrency.
Although cryptocurrency trading is banned in China, some investors have continued to use crypto to evade restrictions and explore offshore opportunities.
However, the recent stimulus and stock market rally have shifted their focus back to traditional investments.
Analysts believe that this trend could lead to increased downward pressure on USDT as more investors exit the crypto market.
At the time of writing, the Tether price was $0.9995.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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