Tether (USDT) Trades Below $1 as Investors Dump the Stablecoin for Yuan to Invest in Chinese Stocks

USDT has been consistently trading below the price of the U.S. dollar since late September, according to CoinMarketCap. The decline is very slight—last Tuesday, Tether was trading at $0.9995 to the dollar—but the tip does point to a push to dump the stablecoin for yuan and to invest in Chinese stocks, which have surged as a result of the state's recent stimulus efforts.

Stablecoin USDT has been trading below the U.S. dollar price since late September, according to CoinMarketCap. The decline is very slight—last Tuesday, Tether was trading at $0.9995 to the dollar—but the tip does indicate a push to dump the stablecoin for yuan to invest in Chinese stocks, which have soared as a result of the state’s recent stimulus efforts. The three to five percent fee to liquidate USDT has not seemed to deter investors who stand to benefit significantly if the Chinese stock market continues to skyrocket.

Stablecoins are a type of cryptocurrency that aims to avoid the volatility associated with other digital assets like Bitcoin by tying their value to a fiat currency, like the U.S. dollar. USDT, which Tether launched in 2014, has become the largest stablecoin by far and has a current market cap of around $119 billion.

After 2017, USDT became the go-to cryptocurrency in China when the government banned citizens from exchanging yuan for crypto and restricted access to all crypto trading websites, according to a study conducted by Chainalysis.

Since then, Chinese investors have treated Bitcoin and other digital assets as a safe-haven as the domestic economy has floundered. These investors have evaded restrictions by using overseas bank accounts and over-the-counter desks or exchanges like Binance. China’s over-the-counter brokers have attracted a record $75.4 billion in the first part of the year, according to a Chainalysis report, showing a strong appetite for crypto despite the bans.

China’s Stimulus Package

The Chinese government announced a vast array of stimulus efforts on Sept. 24 to curtail the country’s economic downturn and hit end-of-year growth targets. These efforts included cutting the reserve requirement ratio by 50 basis points and the 7-day repo rate by 0.2 percentage points. Economists expected these policies to be bullish for crypto, but Bitcoin has not made significant movements, remaining between $50,000 and $70,000.

In the wake of this announcement, the Shanghai Composite Index surged 20%, the highest since May 2023. The Hang Seng China Enterprises Index followed suit, soaring over 25% since late September. The Shanghai Composite Index was closed since the end of September in observance of China National Day and reopened today.

While Tether has been trading above or below the dollar most of the year, it hasn’t experienced massive swings like those seen in its early years. The stablecoin reached its highest and lowest in 2015 at $1.22 and $0.57. For most of 2024, it has oscillated between $1.0022 and $0.9981.

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