What is "USDT OTC Premium"? How Does It Relate to Crypto Trading?

Since 2020, USDT's minting speed has far exceeded that of previous years, driving USDT's market cap to surge. As of April 2022, USDT's market cap exceeded $82.7 billion, ranking third in the crypto market by market cap, behind only Bitcoin and Ethereum, making it the largest stablecoin by market share. USDT provides extremely strong liquidity, with a daily turnover rate typically ranging from 200% to 500%, and daily trading volume reaching $50 billion to $100 billion.

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USDT Market Cap

As an important bridge for funds entering and exiting the crypto market, changes in stablecoin USDT's demand can reflect investors' attention to the crypto market. An important indicator for detecting changes in USDT demand is the "USDT OTC Premium."

What is the USDT OTC Premium?

In theory, USDT's price should be equivalent to the US dollar price, but in practice, USDT is always above or below the US dollar price, resulting in a premium. The USDT OTC premium is the ratio of the OTC market price to the US dollar. Under normal circumstances, prices are affected by supply and demand, so excessive demand for digital assets often pushes this indicator above the 100% fair value, known as a positive premium; conversely, when the crypto market is sluggish, lower USDT market quotes cause the indicator to show a 4% or higher discount rate, known as a negative premium. As such, the USDT OTC trading premium can reflect the retail purchasing volume of digital assets and serves as a reference for short-term market capital volume and activity. In simple terms, the more people buying USDT, the higher the USDT price, resulting in a positive premium, and vice versa.

Historical data shows that USDT OTC premiums during bull markets are mostly positive. For example, during the 2017 bull market, USDT's OTC premium rate once reached as high as +5.76%, with OTC funds continuously flowing into the crypto market via USDT. During bear markets, USDT generally shows a negative premium. For example, on October 16, 2018, between 1 PM and 2:30 PM, USDT against the Chinese yuan dropped from 6.70 to 6.20, with a premium rate of -8%.

The USDT OTC Premium Rate Affects Trading Costs — How to View It?

When market conditions decline sharply, many investors need to exchange tokens for stablecoins or fiat currency to hedge risk. At this time, the focus is on changes in demand. USDT may show a positive premium or switch to a negative premium.

For example, on the day of the March 12, 2020 crash, the market fell into extreme panic. Many people were eager to exchange their various tokens for stablecoins to hedge, while some OTC investors were rushing to buy the dip. This led to USDT's premium reaching as high as 14.29%, while the stablecoin liquidity on nearly all decentralized exchanges was nearly depleted. From this point onward, USDT was massively minted, with these tokens mainly flowing into centralized exchanges. When the amount of USDT minted was sufficient, USDT began showing a negative premium in fiat trading zones.

Since fund inflows and outflows vary across different platforms, USDT's premium also varies. So how do you view OKX 's USDT OTC premium rate? You can click [Discover] - [Markets] - [Trading Data ] on the OKX website, or click [Discover] - [Data] on the app.

This indicator displays the OTC premium of USDT in OKX's fiat trading zone in real time, serving as a good indicator for measuring domestic retail purchases of digital assets. It can also further reflect the inflow and outflow of funds on exchanges and has a certain indicative effect on digital asset prices.

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Of course, no indicator is foolproof. When making investment decisions, you should also consider other factors comprehensively, such as fundamentals, technical indicators, economic conditions, and regional conflicts.

After a Premium Appears, How Does USDT Maintain Price Stability?

As an indicator, the USDT OTC premium reflects market conditions. At the same time, as an actual price fluctuation, it also impacts future market trends. A positive USDT premium leads to rising prices of mainstream coins, and fewer people will sell USDT to withdraw funds, which is generally bullish for the market; conversely, a negative premium is generally bearish for the market, causing large capital outflows.

Generally speaking, the appearance of positive and negative USDT premiums is normal, as any healthy market price will fluctuate. However, as a stablecoin, "stability" is USDT's top priority, so USDT has also designed a correction mechanism.

First, USDT is pegged to the US dollar in the real world. People can exchange USDT for US dollars at a 1:1 ratio. Therefore, when a significant premium occurs, the market will spontaneously arbitrage until the price stabilizes.

Additionally, Tether adjusts supply to stabilize USDT's price: generally, when USDT shows a positive premium, large amounts of USDT can be observed being transferred out of Tether's accounts, which the market interprets as a "mint." This minting is a post-hoc behavior; conversely, after a period of USDT negative premium, Tether will choose to repurchase and destroy a portion of USDT to ensure the ecological balance of the trading market.

From 2015 to present, USDT has been minted by over $70 billion, accompanied by the crypto market's total market cap reaching a peak of $3 trillion. USDT's related developments are undoubtedly a major market indicator worth investors' constant attention.

Disclaimer

This article may contain product-related content not applicable to your region. This article is only intended to provide general information and makes no responsible for any factual errors or omissions herein. This article represents the author's personal views only and does not represent OKX's views. This article is not intended to provide any advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins) involves high risk and may fluctuate significantly or even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions specific to your situation, please consult your legal/tax/investment professional. The information in this article (including market data and statistics, if any) is for general reference only. Although all reasonable precautions have been taken in preparing such data and charts, we accept no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in full, and excerpts of 100 words or less may be used, provided that such use is non-commercial. Any reproduction or distribution of the full article must prominently state: "This article is copyrighted © 2025 OKX, used with permission." Permitted excerpts must cite the article title and include the source, for example, "Article title, [Author name (if applicable)], © 2025 OKX." Some content may have been generated or assisted by artificial intelligence (AI) tools. Derivative works and other uses of this article are not permitted.