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For everyone who is new to the currency circle, whether they are speculating or doing something else, the first currency that 99% of people will come into contact with is USDT. USDT (Tether) is familiar to people in the currency circle, but it is very unfamiliar to novices who are new to the currency circle. Today, Uncle Wen will talk about USDT (Tether Coin) with newcomers who are new to the currency circle or want to enter the currency circle.
There are currently a variety of stable coins on the market such as USDC, DAI, TUSD, FDUSD, etc. USDT is one of the stable coins issued by TEDA based on blockchain technology. Its English name is: Tether, its token number is USDT, and its Chinese name is TEDA Coin. Its value is anchored to the US dollar 1USDT = 1USD (US dollar).
USDT is the largest stable currency in circulation on the market.
TEDA officially claims that it will use equivalent U.S. dollars as guarantee and provide a service in which 1 USDT can be exchanged for 1 U.S. dollar. What is the purpose of this? Before the emergence of stable coins, all early currency pairs would be affected by bilateral exchange rates when conducting transactions. For example, the price of Ripple at that time was anchored by Bitcoin. At that time, Bitcoin had the largest trading volume and the highest market value. However, the price of Bitcoin fluctuated greatly and was not suitable as an anchored currency. Therefore, stablecoins were born, which solved the problem of bilateral exchange rates.
As long as you change to a stable currency, you can not be affected by the rise and fall of the market. This has a very obvious hedging effect on funds and has gradually become a rigid demand in the market. When you use legal currency to buy official USDT, your legal currency will be automatically converted into US dollars and deposited in the official account. The number of US dollars stored in this account represents how much USDT is circulating in the market. TEDA reserves reserves at a ratio of 1:1. For every USDT issued, there will be 1 more US dollar in the official account. This is why USDT is able to maintain the basis of stable prices.
On the contrary, when the user converts USDT into US dollars, the official will simultaneously destroy the equivalent USDT to ensure that the reserve fund of the official account is consistent with the circulation. In order to improve transparency, on the official website of Tether, you can check the latest official US dollar reserve amount. Because it is guaranteed by US dollars, most exchanges will support USDT as a pricing trading pair!
Because 1USDT = 1USD (U.S. dollar), the price of USDT will also be affected by the exchange rate of the U.S. dollar. Recently, the price of USDT has dropped from more than 7 yuan to more than 6 yuan. This is because the Federal Reserve has begun to cut interest rates, and the number of U.S. dollars circulating in the market has increased, resulting in the depreciation of the U.S. dollar. The price fluctuations of USDT caused by interest rate increases and decreases in this normal currency cycle are normal.
The sharp decline in USDT must be due to the occurrence of some kind of unexpected event that caused USDT and USD to become unanchored, resulting in a panic, which led to a sharp decline in local or global USDT prices!
In essence, it is the spread of panic that leads to an imbalance in the supply and demand relationship of USDT in the market.
The price of USDT has experienced several price dives in history, and TEDA has experienced several crises of trust. It was accused of insufficient reserve funds, which caused the price of USDT to become seriously unanchored in a short period of time and the price fell sharply, but it quickly recovered.
In 2020, an exchange issued an announcement saying that some of the company's private key managers were cooperating with the public security agency's investigation. They were currently out of contact, unable to complete authorization, and suspended currency withdrawals, causing market panic. Major merchants and retail investors sold USDT in large quantities, resulting in a sharp plunge in the price of USDT outside the exchange. The negative premium of USDT in the exchange was serious, and it took several weeks to recover.
Although there have been many crises of trust, as of October 2024, USDT has a market value of US$120 billion, ranking third in the crypto market by market value, second only to Bitcoin and Ethereum, and is still the stablecoin with the largest market share.
The OTC premium of USDT is the ratio of the OTC price to the US dollar. Excessive digital asset purchase demand will often make this indicator higher than the fair value of 100%, that is, the demand is excessively greater than the supply, causing the price to be higher than the normal price range for a short or long period of time, which is called a positive premium.
On the contrary, when the demand in the crypto market is low, when the supply is strong, and the supply is greater than the demand, a lower bid price will cause the price to be lower than the fair value of 100%, which will result in a lower bid price, which is a negative premium.
According to the rules of the cryptocurrency market, generally the OTC premium of USDT in a bull market is a positive premium. At this time, funds are rushing to enter the market and the demand is large. On the contrary, in a bear market, USDT prices generally have a negative premium. Of course, this is not entirely the case. The outbreak of local market conditions will also cause positive and negative premiums of USDT in the short term.
For newcomers to understand this rule and apply it in practice, you can act according to this logic when to sell and when to buy the U in your hand, which will also help save your own currency holding costs.
I am Uncle Wen. I follow the currency merchant firm and focus on the laws and regulations of the cryptocurrency circle, judicial freezing of bank cards, disciplinary appeals for two cards, currency merchant OTC, safe U-exit channels, etc.
