Deciphering the reason for the high premium of USDT: old players switch to U mining and newcomers enter

In recent days, on the over-the-counter trading platforms of many exchanges, there has been a premium in the price of USDT against RMB. Taking currency as an example, on April 4, the price of USDT on Huobi OTC reached 6.79 yuan, while the exchange rate of USD The list price was 6.56 yuan, a premium of as much as 3%. Does such a premium mean that more off-market funds are entering the market?

As a bridge between legal currency and cryptocurrency, USDT has always had two major markets. One is the market for various cryptocurrencies to exchange for USDT, including centralized exchanges and markets on Defi; the other is USDT1:1 exchange for US dollars This market is mainly composed of USDT official exchange, large over-the-counter traders and USDT/USD trading pairs of some compliant exchanges.

The price of USDT for various cryptocurrencies is determined by the market, and Tether cannot intervene. However, Tether must ensure that the price of USDT to USD is 1:1, otherwise USDT will not be able to play the role of a stable currency. Therefore, Tether officially promises USDT and USD 1:1 exchange, and some large OTC traders also rely on Tether's official exchange.

Russia’s Constitutional Amendment Voting System Vulnerability Allows Users to Decrypt Results Before Counting: Russia’s blockchain-based constitutional amendment voting system has a vulnerability that makes it possible to decipher ballots before they are officially counted. According to research by local outlet Meduza, the voting system relies on so-called deterministic encryption, which uses the same parameters to produce the same ciphertext. Both the sender and receiver receive a shared secret that can be used to encrypt or decrypt messages. This means that any voter could theoretically decipher his own ballot, even allowing a third party to do so, before the Election Commission deciphers it. In order to do this, voters must save their private keys. Meduza conducted an experiment where all participants retrieved their private keys and were reportedly able to decrypt all ballots. According to the article, the flaw could theoretically allow employers to ensure their employees voted, or even trick them into saving their private keys and then checking their votes. On the other hand, the same loophole could be used to increase voting transparency in cases where the Election Commission refuses to release declassified information on every ballot. (Cointelegraph)[2020/7/2]

However, if you check Tether’s official website, you can know that the official exchange threshold for US dollars is at least 100,000 US dollars, and the handling fee is 1,000 US dollars or the exchange amount * 0.001, whichever is higher. It can be seen that for retail investors, go to Tether’s official website. Not the best choice.

Telefónica Group Launches Free Tool to Decrypt Files Affected by VCryptor Ransomware: Jinse Finance reported that Spain-based telecom group Telefónica released a free tool for recovering data encrypted by VCryptor ransomware. The tool, VCrypt Decryptor, part of the international initiative "No More Ransomware," is one of several tools aimed at decrypting nearly 134 types of ransomware. The alliance was formed by McAfee, Europol, Politie and Kaspersky. . [2020/6/4]

In Tether's [User Terms], there is such a passage:

"Tether reserves the right to delay the exchange of US dollars to users when Tether's reserve assets have liquidity problems or losses. At the same time, Tether reserves the right to exchange to user securities or other reserve assets held by Tether."

News | WikiLeaks Bitcoin donation address tracking: One address has received a total of 4042 BTC and transferred them all out: WikiLeaks currently has two public Bitcoin addresses that accept external donations. As of April 19, one of the older addresses (1HB5XMLmzFVj8ALj6mfBsbifRoD4miY36v) has received more than 20,000 donations in total, receiving a total of 4042.85649978 BTC, and has transferred them all out; another newer address (36EEHh9ME3kU7AZ3rUxBCyKR5FhR3RbqVo) has received a total of 261 There are 10 donations with a balance of 4.69532962 BTC. Judging from the received donation addresses, in addition to personal addresses, 10 of them came from the mining pool Eligius, and the rest came from exchanges such as Bittrex.com, Xapo.com, HaoBTC.com, etc. It should be noted that this does not mean that these organizations donate directly to WikiLeaks, it is likely that their individual users directly mentioned Bitcoin to WikiLeaks’ donation address through the coin withdrawal function. (Beijing Lianan) [2019/4/23]

In other words, when a user takes USDT to go to Tether to exchange dollars, Tether may have no money to exchange, or may only give the user some equivalents it holds.

Analysis | Golden disk: Deciphering the nature of the market rebound: Comprehensive analysis of the golden disk: According to the proportion of the total market value in the figure, BTC has continued to decline after August 14, which indicates that funds have fled from BTC and flowed into other currencies for arbitrage. From the comparison of market prices, it can be found that BTC has returned to the price level on July 15th, but the total market value of the market is only 223.6 billion US dollars, which is 10% lower than the 2495 US dollars on July 14th. Market capitalization fell 22%, from $141.5 billion to $110 billion. At present, the impetus for the rebound is likely to come from the 30 billion US dollars that fled at the beginning, and whether incremental funds will enter the market, we still need to observe further. [2018/8/18]

As we all know, Tether does not hold US dollars equivalent to the total amount of its usdt issuance, but holds the same amount of assets. What constitutes these assets, Tether has not yet announced to the outside world.

Therefore, Tether's main method of maintaining the USDT stablecoin exchange rate is to maintain a 1:1 exchange rate by making a market on the USDT/USD trading pair. At present, there are three main exchanges with USDT/USD, namely Bitfinex (24-hour trading volume of more than 70 million US dollars), Kraken (24-hour trading volume of more than 40 million US dollars) and FTX (24-hour trading volume of more than 30 million US dollars). The total transaction volume is 150 million US dollars. For Tether, which has more than 40 billion assets, it is easy to maintain the exchange rate through market making.

In the field of RMB users, USDT does not have an on-market market for exchanging fiat currencies, but only over-the-counter transactions. Due to the high degree of decentralization of over-the-counter transactions, it is obviously impossible for Tether to find an effective market-making method to maintain the exchange rate at 1 :1. Any price deviation is due to changes in the balance of supply and demand, and there are two possibilities for the value of USDT to deviate from the official exchange rate of USD to RMB.

One is that the balance of supply and demand in over-the-counter transactions has been broken, and the supply exceeds demand, and sellers cannot meet the huge market demand, so USDT has generated a premium;

The second is that the balance of supply and demand of cryptocurrencies on the market has been broken, and people are exchanging cryptocurrencies for stable coins, resulting in a premium for USDT.

No matter which of the above situations occurs, Tether needs to increase the supply of USDT to ensure the stability of the exchange rate. On March 12, 2020, the market was in a state of extreme panic, and many people rushed to exchange cryptocurrencies for stable coins to avoid risks, which resulted in a huge premium of usdt to renminbi, up to 7.8.

If the exchange rate of USDT over the counter to RMB is 3% higher than the official exchange rate, in the field of foreign exchange, it is a huge arbitrage space. Users can use US dollars to directly buy USDT from Tether, sell it in the RMB over-the-counter market, and exchange the obtained RMB into US dollars, so repeated operations. But in fact, no one has done it, and the premium has always existed, mainly for two reasons.

First, the reasons for foreign exchange controls. At present, each resident of our country only has an exchange quota of 50,000 US dollars per year, and there are many restrictions on remittances, making it basically impossible to directly purchase USDT from Tether;

Second, there is a lot of black money in the market. Even if the problem of currency exchange is solved, when the user sells the USDT that was moved to exchange for a large amount of RMB, there is a certain probability of receiving funds from unknown sources, resulting in the freezing of the bank account or more troublesome things.

The current premium of USDT is just accompanied by the drop of BTC price from 60,000 US dollars, so the generation of this premium may come more from the exchange of cryptocurrencies by on-site players for stable coins, rather than the running of off-site RMB players. For example, in the Shenyu DeFi video, a large DeFi player dug up more than 1 billion US dollars in recharges. It is expected that not only their own stable coins, but also borrowed a lot of USDT from the outside.

However, some OTC merchants said that there are more newcomers outside the market at present, especially Filecoin is very hot out of the circle; and traditional OTC merchants have been severely investigated by the government for money laundering. This may also be one of the reasons for the U premium.

Wu Shuo Author | Tan Shu

Editor of this issue | Colin Wu

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