Since late September, Tether (USDT, Financial) has been trading at a discount to the US dollar, which experts suggest could indicate a rush among traders to buy Chinese stocks. As funds flow back into China's stock market, the cryptocurrency market, particularly USDT, has been experiencing significant declines.
USDT, a stablecoin pegged to the US dollar, theoretically maintains a value close to $1 USD. A discount from this value suggests that investors may prefer holding dollars or other more stable assets. Livio Weng, CEO of Hong Kong's cryptocurrency exchange Hashkey, pointed out that the eagerness of traders to convert assets back to Chinese yuan could infer a strategic move towards purchasing Chinese equities.
On Binance's peer-to-peer market, 1 USDT can be exchanged for between 6.78 to 6.98 yuan, while the offshore yuan to USD exchange rate has risen to around 7.09. This discount provides a potential arbitrage opportunity for investors to buy USDT with dollars, convert it to yuan, and invest in the Chinese stock market for potentially higher returns.
Annabelle Huang, managing partner at Singapore's Amber Group, observed a correlation between this phenomenon and the demand for onshore A-share trading. Brokerages in China have even extended their services during the national holiday to accommodate new account openings.
This investment interest is not limited to retail investors. Laura Vidiella del Blanco of New York-based MNNC Group noted that some institutional investors are also reallocating funds into Chinese stocks.
