Chinese Investors Flock to Stocks, and Cryptocurrencies Are Being Impacted
Date: 2024-10-07 Author: Henry Casey Categories: CRYPTO PAYMENTS
According to data, there is a trend of Chinese investors moving their funds away from crypto assets and into the stock market as demand for stablecoin Tether (USDT) is declining. This decline in the price of USDT indicates panic among traders looking to exchange their digital assets for fiat money and confirms the growing interest in China’s booming stock market, especially given the recent rise in the Shanghai Composite Index.
Despite China banning cryptocurrency exchanges in 2021, many mainland Chinese continue to use overseas accounts and exchanges to trade digital currencies to avoid capital controls and move assets overseas. Meanwhile, USDT, the world’s most used stablecoin, has been trading at a discount to the dollar since late September, according to Dessislava Obert, a senior analyst at Kaiko.
The decline in USDT’s price comes as China’s central bank takes steps to improve the economy, sending stocks soaring. Stablecoins are cryptocurrencies that are typically pegged 1:1 to the dollar or other assets, and serve as both a means of payment and a hedge against price swings in more volatile tokens like Bitcoin.
Livio Wang, CEO of Hong Kong-based crypto exchange Hashkey, says the rush to turn their holdings into fiat is a sign of panic buying in Chinese stocks. The lack of USDT/CNY trading pairs on crypto exchanges due to the ban has made the dollar the main indicator of market activity.
While it’s difficult to pinpoint exactly how much of the USDT selling pressure is coming from Chinese investors, other platforms paint a clearer picture. On Binance, yuan traders are bidding between 6.78 and 6.98 yuan per USDT, while the offshore yuan is trading at 7.07 yuan per dollar on the traditional forex market.
There’s a direct correlation between domestic stock trading demand and USDT price movements, according to Annabelle Huang, managing partner at Singapore-based investment firm Amber Group. Some brokerages even stayed open during the recent Chinese holidays to attract new clients.
The inquiries aren’t just coming from retail investors. Laura Vidiella del Blanco, head of business development at crypto hedge fund MNNC Group in New York, noted that some institutional investors are also starting to shift their holdings into Chinese stocks.
The Shanghai Composite Index rose 21% from Sept. 23 to Sept. 30, the day before the Chinese market closed for the holiday. “These investors tend to be familiar with the market and employ a variety of strategies beyond digital assets,” added Vidiella del Blanco.
Chainalysis has reported “unprecedented” inflows into Chinese OTC platforms this year, indicating strong demand from Chinese investors for cryptocurrencies despite the ongoing ban. “For the first time, people may want shorter national holidays. It’s quite an impressive move,” said Amber’s Huang.
