The Chinese currency circle panics and sells USDT "at a negative premium of 1.5% against the RMB", a bear market and a wave of regulatory flight?

China's OTC market has seen a rare "negative premium" for USDT, showing regulatory pressure and a wave of capital flight.
(Preliminary summary: China’s official stance on stablecoins for the first time, the era of gray fantasy for StableCoin is over)
(Background supplement: Lawyer’s point of view: Why does exchanging RMB for stablecoins constitute an illegal business crime?)

The price of USDT in China’s “underground” crypto market has always been slightly higher than the nominal exchange rate of RMB against the US dollar, but now it is at a reverse discount. In early December, against the backdrop of USD 7.07 against RMB, USDT’s over-the-counter quotation reached RMB 6.92-6.95 today, with a negative premium of approximately 1.5% or more. This price difference of 0.12 yuan has aroused the attention and vigilance of the crypto investment circle.

The following is the Binance C2C RMB store, which has never seen an exchange rate above 7.

Negative premium symbolizes panic selling

Under China's "ostensibly" strict foreign exchange controls, USDT is often regarded as a shadow dollar. The negative premium in the past was mainly due to two driving forces, namely flight demand and liquidity gap. Now that the selling price is upside down, it shows that people who hold the currency are willing to sell it even if they are willing to cut their own flesh. It shows that China’s announcement last month to crack down on cryptocurrency trading is seeing an effect.

Extended reading: The People's Bank of China announced a joint operation to "combine cryptocurrency trading speculation": stable coins and other illegal financial activities

The dynamic zone received news that many cryptocurrency OTC merchants (oil merchants) in China were worried that their bank accounts would be frozen and other legal measures under supervision. They suspended currency collection on a large scale, and were selling USD stablecoins such as USDT in large quantities. Many U business owners complain that the "519" purge is back in 2021.

Will Chinese retail investors die out?

Usually, the price of stablecoins is between -0.5% ~ +0.5% , which symbolizes the balance between supply and demand. The price of USDT is close to the US dollar, -0.5% ~ -1.0% means a slight discount, and there are slightly more selling orders, which may be due to poor liquidity or a slight correction on the weekend. A negative premium greater than -1.5% (currently) is considered a serious discount Panic Sell.

It means that a large number of users are eager to exchange USDT for RMB cash, resulting in oversupply. Of course, in addition to supervision, part of the pressure also comes from the previous downgrade of USDT to the "worst grade". However, when Bitcoin is in the "bull-bear boundary" price range of US$93,000, Chinese retail investors are selling USDT in large quantities, which may also be seen as a precursor to the subsequent withdrawal of liquidity from the crypto market.