Tether has been used in 99% of the Bitcoin spot trades in China so far this year. Binance has just launched a P2P yuan exchange service between peers in China.
Investors in Bitcoin and other cryptocurrency prefer to keep an eye on China, even after regulators began taking strong measures against digital assets. In recent months, the OTC (over-the-counter) cryptocurrency market in China has exploded, just as Chinese traders began buying Bitcoin with the dollar-pegged stablecoin Tether (USDT).
A study conducted by Chainalysis Inc. showed that Tether has been used in 99% of the Bitcoin spot trades in China so far this year, almost completely displacing the yuan. Meanwhile, the Bitcoin trade in similar markets, such as the Japanese and Korean ones, is mainly conducted with fiat money, as revealed by the research.
According to data from Chainalysis, about 40% of the 50 main cryptocurrency exchanges, regarding Bitcoin blockchain activity, are distributed throughout the Asia-Pacific region. During the first half of 2019, 35% of all received Bitcoin was recorded in these financial institutions. The exchange houses in the region also dominated the options and futures trade, with a total of almost 90% of the USD 2.36 billion contracts negotiated worldwide.
Philip Gradwell, chief economist at Chainalysis, whose headquarters are located in New York, stated that people should pay more attention to the price formation in big Asian exchange houses. In addition, he noted that there will probably be large amounts of liquidity there that, for example, these OTC brokers will provide, as it can move very quickly.
Binance, the largest cryptocurrency exchange house in the world, has just launched a peer-to-peer (P2P) yuan exchange service in China.
Tether began to dominate cash trade in 2018, just after the Chinese government imposed a ban on its citizens exchanging yuan for cryptocurrencies. Since the ban introduced in 2017, many people have been conducting exchanges from yuan to Tether through P2P exchange services or the OTC market, which is considered legal in China. Then they would proceed to use their Tether to buy Bitcoin and other cryptocurrencies.
Thanks to this growing demand for Bitcoin, market capitalization has achieved a threefold increase as of the beginning of 2018, since the private company behind Tether, whose headquarters is located in Hong Kong, issued more coins, although it not clear what exact issuance mechanism was used. At the beginning of this year, Tether became the most widely used cryptocurrency in the world, even exceeding Bitcoin, whose market capitalization is almost 38 times higher, according to data from CoinMarketCap.com.
After the introduction of the ban in China, OTC cryptocurrency trade has increased by leaps and bounds. Only 10 of the Asian OTC brokers tracked by Chainalysis received USD 877 million bitcoins during the year ending September 30th, which is as much as 52% more than in the previous 12 months.
Kim Grauer, senior economist at Chainalysis, considers that the way Bitcoin trade has grown in China is amazing. Once again, it can be observed why the cryptocurrency par excellence has maintained its popularity among the citizens of that Asian country.
By Willmen Blanco