Why do exchanges use USDT as the legal tender (Why is buying USDT cheaper than selling)?

Why do exchanges use USDT as the legal tender? Why do exchanges use USDT as the legal tender?

On May 8, 2018, the US cryptocurrency exchange platform Bitfinex announced a strategic partnership with USDT. According to the agreement, the company will issue stable US dollars (USDT) and euros (EUR). Zhao Changpeng, CEO of Bitfinex, said: “We are pleased to support USDT as a legal tender. In the coming weeks, we will provide users with better products and services and help them gain more sources of income.” (CryptonewsFlash)

It is reported that Bitfinex, Ethfinex and Kraken have become the main trading markets for Bitfinex.

Why is buying USDT cheaper than selling it?

USDT is the most popular stablecoin in the global digital currency market, with its own exchange rate and trading pairs around the world. Bitcoin, as a cryptocurrency, is valued at 1 US dollar or equivalent franc (approximately 10 Chinese yuan). Ethereum has become the main payment medium and occupies the majority of the market value, making it the first virtual asset issued by a central bank in history. Why is buying cheaper than selling? Let’s first look at the chart from left to right:

From this chart, we can see that the price of USDT corresponds to the price trend of other cryptocurrencies, indicating that buyers need to buy and sell USDT through an intermediary to obtain more transaction fee income; sellers must use these services to obtain lower transaction fees, as USDT trading platforms charge higher fees and have slower transaction speeds. In addition, the trading volume of USDT is currently very high and relatively active, but the actual transaction situation is not ideal, indicating that the trading volume of USDT trading platforms is relatively low and the liquidity is much worse. Secondly, this is a normal situation.

The third point is that many people consider USDT as a speculative cost because its price fluctuates greatly. If all investment portfolios are placed under centralized management on exchanges, there are risks. Therefore, there is a situation where when you invest your funds into a centralized exchange, it will be affected and incur losses. This is why people often consider whether to sell stocks or gold during trading.

The fourth point is the reason for using Bitcoin as a settlement method. Generally, investors need to understand what they want to buy and how it operates before choosing to purchase goods. For example, if you want to buy a Tesla worth 100 US dollars and then decide what to do with it and which products are suitable for purchase; if you want to hold a large amount of BTC in the short term, you need to put the money into a custodial account. In this way, users can participate freely as if they own Bitcoin. This model is not easy to understand, but it is the arbitrage method that everyone is accustomed to.