Why Is Stablecoin Tether (USDT) So Popular Among Traders in China?
Stablecoins might not seem to be the most exciting cryptocurrencies because they don’t present the same risk/reward profile as other coins such as Bitcoin (BTC). That’s a function of their stable status that is possible because of often being pegged 1:1 to a fiat currency such as the U.S. dollar, which is the case for Tether (USDT).
In fact, Tether, which is the biggest stablecoin based on market cap, has become increasingly popular among traders to move in and out of other cryptocurrencies quickly and easily without the hurdles that accompany fiat onramps. One country where this trend is increasingly prevalent is China, where incidentally bitcoin – while wildly popular – faces some of its fiercest headwinds.
Bitcoin Headwinds
Cryptocurrencies have taking China by storm. China boasts the highest concentration of bitcoin miners, with roughly three-quarters of the Bitcoin (BTC) network’s hashrate originating from Chinese mining pools. Meanwhile, China remains a leader for its availability of crypto exchanges, especially in the Asia Pacific region. And while China’s National Development and Reform Commission has placed bitcoin mining in its sights in hopes of banning it, that has not happened — yet.
These conflicting forces — a high demand for crypto trading among the locals and a disdain for bitcoin in the government — have given rise to the stablecoin in China, particularly Tether. Chainalysis explored the most popular trading pairs in the APAC region across China, Japan, and Korea year-to-date. While in Japan and Korea fiat-based trading pairs BTC/JPY and BTC/KRW led the way, China was a different story, where the BTC/USDT trading pair was №1.
The Chainalysis report goes on to state:
“ Instead, nearly 100% of the trades involve exchanging Bitcoin for Tether or vice versa. In other words, for Chinese exchange users, Tether has replaced the yuan as the go-to fiat currency.”
There is a logical explanation for this phenomenon in China, which traces back to the Chinese government’s decision at year-end 2017 to ban yuan-based trading pairs in crypto. Prior to the ban, the CNY/BTC trading pair dominated. Once the ban was implemented, traders took some time to regroup, during which time BTC trading hit a lull in the country.
Soon after, Tether stepped in as the de facto currency of choice when push came to shove for China-based traders.
When you consider over-the-counter trading trading, the scenario shifts somewhat. Chinese users can use the yuan to trade BTC in 1.) a peer-to-peer scenario or on 2.) crypto exchanges with over-the-counter platforms, such as “private WeChat groups” and Huobi, respectively.
Published at Sat, 19 Oct 2019 12:52:46 +0000
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