According to a report by Muyao Shen for Bloomberg, some Chinese investors appear to be moving away from cryptocurrencies and back into the nation’s stock market, which has recently surged due to central bank measures. Although crypto trading was officially banned in 2021, Bloomberg reports that many mainland residents have continued to access overseas accounts to trade digital currencies. This strategy has allowed them to bypass capital controls, often to move assets offshore.
The Bloomberg report notes that the USDT stablecoin, the world’s most traded cryptocurrency, has recently been trading at a discount to the US dollar. This discount emerged around the end of September and coincided with several economic policies introduced by China’s central bank. These policies, designed to improve the country’s economic outlook, helped drive stock prices higher, making the stock market an attractive option for investors.
Stablecoins, including USDT, are typically pegged to the dollar, providing a stable alternative to more volatile cryptocurrencies like Bitcoin. As Bloomberg explains, when USDT trades at a discount, it suggests increased selling pressure on the cryptocurrency. Livio Weng, CEO of Hashkey, a Hong Kong-based crypto exchange, told Bloomberg that this trend indicates investors may be selling Tether to purchase Chinese stocks, potentially driven by market panic.
Bloomberg reports that due to China’s ban on direct USDT/yuan trading, the dollar has become the standard gauge for measuring activity. As a result, the discount in USDT signals higher demand for dollars. Further insights from Bloomberg show that on Binance’s peer-to-peer marketplace, Chinese yuan merchants are pricing USDT at a lower rate than the official yuan-to-dollar exchange rate, adding more evidence to this shift. Additionally, Laura Vidiella del Blanco of MNNC Group told Bloomberg that some institutional investors are reallocating their assets toward Chinese stocks, which is contributing to the rapid rise in market prices.
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