Chinese crypto investors and traders don’t have the easiest or simplest access to crypto markets anymore. Following the country’s blanket ban on all crypto related activities, investors now have to head through a long-winded process in a bid to catch some of the crypto action. The first step is to acquire some form of stablecoin from an OTC trading desk, and these very same desks are reporting a huge surge in demand from Chinese investors. Does this mean China is bullish on crypto again?
Stablecoins are the Gateway to Crypto Heaven
Stablecoins are considered digital fiat currency, and the Chinese government aren’t so strict on who owns which stablecoin – making them the perfect entry point for Chinese crypto investors. The huge demand has caused a rather large premium to be placed on stablecoins in the country, with 1USDT going for around 7CNY – the official rate is 1 USDT to 6.7 CNY. Despite this rather large premium, Chinese investors are still willing to pay the price just to get a bit of the Bitcoin action simply as it’s their only choice.
Bitcoin Bouncing Back
Last week, Bitcoin sprung back into action and has been climbing ever since. This huge rally and bullish momentum has lasted long enough that it’s not simply some market manipulation or bull trap – drawing a new flock of investors. Not wanting to be left out from the next bullish market, Chinese investors have been flooding exchanges like Huobi and OKEx with huge buy orders for USDT. A Tweet from cnLedger showed the huge demand and buy orders placed for USDT by Chinese investors – a rather interesting metric to see.
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
Tether Linked to Bitcoin Price Movements
Over the past few years, every time a new batch of Tether is minted to handle huge demand like this, we see the price of Bitcoin rise significantly. Some have called it the Tether manipulation event, but it could easily be where Chinese investors need Tether to get into crypto. Once they have the Tether, they head out and buy Bitcoin in bulk – causing the price to rise. No doubt as these USDT orders are filled, we will see the price of Bitcoin head upwards as Chinese investors pile into the plucky Bitcoin markets.
China is still holding its anti-crypto stance and is showing no signs of letting up. For Chinese crypto traders and investors, it simply prevents one more hurdle to access crypto markets. While buying stablecoins OTC, then being able to buy Bitcoin might mean some traders miss out on key positions, they will continue to use this method until China legalizes crypto trading.