As Bitcoin continued its resurgence over the past week, over-the-counter (OTC) trade deals in Chinese Yuan (CNY) have also been surging, even at disadvantageous conversion rates.
The latest data indicates an increasing demand for the stablecoin Tether (USDT) on OTC trading desks against the Chinese Yuan. At the same time, the price quoted for the USD-pegged stablecoin is being offered at a premium of over four percent.
USDT a Gateway for Chinese Capital?
Nonetheless, Chinese traders are seemingly eager to pay 7 CNY for 1 USDT (although 1 USD = 6.7 CNY), in order to enter the cryptocurrency markets.
In China, due to the ban imposed on cryptocurrency trading in 2017, investors look for ways to circumvent this rule by buying or selling cryptocurrencies either through peer-to-peer (P2P) services or over-the-counter (OTC) markets.
1/ Chinese markets reveal strong buys. OTC (Over-The-Counter) trades, the almost only way to buy bitcoin with fiat in China, showing considerable $ premium (1 USDT = 7 CNY) over the official rate of 1 USD = 6.7 CNY. pic.twitter.com/bd0n0DGFVU
— cnLedger (@cnLedger) April 8, 2019
After acquiring USDT through an OTC exchange, investors will generally use VPN solutions to enter cryptocurrency exchanges and engage in trading digital currencies. The rise in the trading premium for USDT against CNY suggests that the demand for cryptocurrencies is high enough to push conversion rates up.
How Will Chinese Authorities React?
As the cryptocurrency market is showing signs of revival, it’s bound to attract the attention of investors that are waiting for an opportunity to invest in the digital currency market.
BeInCrypto has previously reported on the resurgence of Chinese stocks and the potential scenario where stock trading profits start flowing into the cryptocurrency industry next.
This may not be a coincidence as the Bitcoin price surged during the past week, breaking the $5,000 level. While the increased demand stemming from Chinese markets isn’t the sole catalyst for bullish sentiment surrounding Bitcoin, it could act as a reminder for Chinese authorities to adjust their approach.
Chinese traders and investors appear to be tiptoeing around the current ban on initial coin offerings (ICOs) and cryptocurrency trading. As such, the effects of the industry-wide ban are greatly diminished, as many investors are finding ways to trade digital currencies outside the country’s jurisdiction.
The premium on the USDT/CNY pairing only shows that traders are willing to export even more capital out of China only to participate in the cryptocurrency market.
What do think of the increasing demand for cryptocurrency in the Chinese market? Will authorities try to further stifle it? Let us know your thoughts in the comments!
Image courtesy of Twitter, Shutterstock.