USDT, the leading dollar-pegged stablecoin with a market capitalization of nearly $120 billion, may be facing challenges as the crypto economy in China turns away from the crypto market. The stablecoin has traded at less than $1 since September 30, failing to regain its parity..

While the depeg is marginal and still does not pose any threat to its holders, economists are already speculating on the factors that might be causing this downward pressure on its price. According to Fortune, even the 3% to 5% fees that Chinese investors pay to exchange USDT for yuan have not deterred them from doing it, given the expectation of substantial price increases in the stock market.

Last month, Chinese authorities unveiled one of its largest stimulus packages since the pandemic, lowering the banks’ reserve requirements ratios and increasing the amount of money available for credits. In the same way, China will also issue $28 billion for spending on different projects this year.

This unleashed a stock market frenzy as shares rallied over 20%. Analysts believe this affected USDT, the currency commonly used by Chinese investors to trade cryptocurrency.

While cryptocurrency trading is banned in China, some investors have evaded these restrictions, putting their funds in crypto. According to earlier reports, these investors have used crypto (and even gold) to hunt offshore-based opportunities as traditional market options like real estate and stocks faltered.

Nonetheless, this trend is now being reversed, and the downward pressure on USDT might even grow as these investors expect further announcements to keep the rally going.

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