Just why is Tether volume at an all-time high? – The South African


A mere year after China issued a blanket ban on local fiat on-ramps for crypto exchanges, traders in the nation continue to keep the market bustling by making use of Tether (USDT), the U.S. dollar-backed stablecoin.

Alexander Pack, the co-founder of Dragonfly Capital Partners stated:

“Crypto trading businesses are restricted from accessing banking services in China, but they are thriving nonetheless.”

Generally, traders in nations where crypto exchanges have banking restrictions work around them by using stablecoins. As per data from CoinMarketCap, USDT activity reached an all-time high this month with global market capitalization surpassing $4 billion. According to Bloomberg, USDT is used in 40 to 80% of all transactions on both Binance and Huobi, with Binance now offering loans based on Tether collateral.

However, due to Tether investors favouring over-the-counter transactions, these official exchange volumes barely paint a perfect picture of actual volumes.

CoinMetrics recently released data which tallies a full year of transactions and detected an annual peak in activity as of August 7 with 78,100 active wallets containing USDT and almost 21,300 for USDTe, the ethereum-based counterpart. As per data from ETH Gas Station, Tether recently paid almost $261,000 in fees to ethereum mines to run the secondary version of the stablecoin. Furthermore, an additional Tether-issued stablecoin is on the horizon which will be backed by the Chinese yuan.

All of this considered, USDT brokers have created a lucrative niche in 2019, specifically, brokers who provide fiat liquidity options.

A Chinese investor when citing the condition of anonymity told a crypto publication the following:

“Tether has truly good liquidity in China. One of the primary use-cases is a fiat on- and off-ramp for crypto trading. I did also see some people using tether for legit business use-cases like cross-border trading.”

On the opposite end of the spectrum, two different OTC Asian traders, who requested anonymity to protect their companies told the same publication that a notable amount of their business comes from Chinese clients making use of USDT to move assets out of China’s stringent capital controls.

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A Hong Kong-based trader stated:

“This has always been a significant part of OTC flows in crypto.”

For example, the trader’s OTC desk garnered $45 million in trades on August 6, of which more than 50% was represented by USDT transactions.

A Chinese Tether bull market?

Several experts believe that the sudden spike in Tether volume could be driven by the overall enthusiasm found within the crypto community for a possible bull market return.

A U.S. trader stated:

“Tether is the easiest way to hold a relatively stable volume of value at an exchange that doesn’t accept dollars. It’s much more about that [USDT] network effect than any technology, infrastructure or other advantage.”

In a nutshell, OTC traders provide the fiat on-ramps to USDT, however, this is still a grey market within China’s borders. Chinese traders utilize USDT to liquidate their broader asset portfolios on global exchanges such as Binance, OkCoin or Huobi. These movements affect the bitcoin market due to traders and exchanges opting to use the OG cryptocurrency for fiat liquidity beyond OTC. Kraken, Bitfinex and other exchanges offer these bitcoin trading pairs.

However, the anonymous Hong Kong traded cited that this is not the only avenue that Chinese traders use, which influences broader markets:

“There are billions of dollars coming out of China that have nothing to do with capital controls.”

For example, FTX, an Antigua-based crypto futures market which launched back in April, reportedly facilitates as much as $50 to $300 million in daily volume as per CEO Sam Bankman-Fried. Of these 10,000 FTX users, the majority of them are based in China and are served out of an OTC office based in Hong Kong.

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Tether’s noticeable stability in 2019 is truly astonishing considering that the issuance company has admitted that the stablecoin is not always backed one-for-one by USD. In addition to this, Tether’ sister company Bitfinex’s legal battles in New York over the alleged misuse of Tether seems to not have affected the asset’s stability much.

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