Stable coin that doesn’t stable. Is it a scam?

~ Since the trade conflict between the U.S. and China reignited, dollar stablecoins have been trading in the 1,500 won range, higher than the won/dollar exchange rate, on local exchanges.

Some dollar stablecoins were not “stable” (stable) even though their names were overshadowed by the instantaneous rise of seven times the usual price.

According to the financial sector on the 14th, one representative dollar stablecoin, Tether (USDT), was traded at 1,505 won as of 3:30 p.m. the previous day on Upbit, a virtual asset exchange.

This was more than 5% higher than the won/dollar exchange rate (1,425.8 won), which finished weekly trading at the same time.

Tether soared to KRW 1,655 during the day on the 10th, when concerns over the intensification of the U.S.-China trade conflict escalated due to U.S. President Donald Trump’s remarks, and then exceeded KRW 1,500 for the third day.

It was the first time that Tether exceeded 1,650 won during the day since May last year, when it was first listed on Upbit.

USDC, another dollar stablecoin, also jumped to KRW 1,647 during the day on the 10th, showing a similar trend to KRW 1,500 until the previous day.

It is analyzed that the price of dollar stablecoins, which are traded at the same level as the usual exchange rate, has risen due to the “Kimchi Premium” first of all.

Kimchi premium refers to a phenomenon in which the price of virtual assets of domestic exchanges is higher than that of overseas exchanges.

Kim Min-seung, head of the Covit Research Center, explained, “The impact of U.S. President Donald Trump’s remarks on the night of the 10th caused a sharp drop in the price of virtual assets on overseas exchanges, resulting in a kimchi premium.”

“The kimchi premium generated in Tether is currently around 5%, which is similar to the kimchi premium generated in Bitcoin or Ethereum,” he added.

Surging demand from overseas virtual asset futures investors was also cited as one background.

“Domestic investors who made leveraged investments such as futures on overseas exchanges may have increased their purchase of tethers to pay for deposits through sudden margin calls,” said Kim, head of the center.

In other words, prices immediately jumped as demand for purchasing and remitting dollar stablecoins in Korean won to prevent the liquidation of overseas exchanges.

On a different level, stablecoins showed instantaneous extreme volatility and were unstable.

On the night of the 10th, the price of one dollar stablecoin, World Liberty Financial USD (USD1), rose to 10,000 won during the day. This is 6.8 times higher than the previous day’s closing price (1,465 won).

In the early morning of the next day, the price of one tether at Bithumb soared to 5,755 won.

An industry official said, “It seems to be the result of the sudden surge in prices at a time when the volume of sales has decreased relatively and the volume of purchases has increased at once.”