Tether Price Plunges 12,000 Tomans | Did Central Bank Order Control of USDT Rate?

The price of Tether has dropped by about 12,000 tomans over the past seven days.

According to Ambassador Arjan, the price of Tether in the Iranian market has moved away from the range of 269 thousand tomans and today, Tuesday 21 Mehr 1405, has reached 257 thousand 100 tomans. This reduction has occurred following a series of changes in the currency market and the implementation of the central bank's trading restrictions; However, the entire price drop cannot be attributed to only one decision.

How much has the price of Tether decreased from last week to today?

The price of Tether fluctuated between 267 and 269 thousand Tomans last week. The price of this cryptocurrency reached the range of 269 thousand tomans on 14 Mehr; But after that, the price trend changed and Tether gradually moved away from the recorded ceiling in the following days.

Today, Tuesday, October 21, 1405, each Tether unit is priced at 257 thousand 100 Tomans. By comparing this figure with the rate of about 268 thousand 998 Tomans recorded on 14 Mehr, the price of Tether has decreased by about 11 thousand 900 Tomans, equivalent to 4.4%, during this one-week period.

What was the order of the central bank to control the price of Tether?

The central bank imposed a new limit on Tether transactions in domestic cryptocurrency exchanges from Wednesday, October 8, 1405. According to the announcements published by the exchanges, Tether buying and selling was stopped between 21:00 and 9:00 AM, and the daily purchase limit of each user reached 2,000 Tether. This restriction was initially announced until Sunday, October 12, but it was extended again.

The importance of the central bank's decision to limit Tether transactions comes from the role of this digital currency in the Iranian currency market. Tether is usually traded close to one dollar in the global market, but its Toman price in Iran is affected by the exchange rate, supply and demand, and the trading conditions of domestic exchanges. Because the Tether market is 24/7, traders can react to political and economic news during hours when the traditional currency market has limited activity.

By limiting the trading hours and setting the Tether purchase limit, the Central Bank practically limited traders' access to one of the ways to convert Tomans into dollar assets. The expected purpose of this action was to slow down the transmission of news shocks to the Tether price and prevent overnight fluctuations from affecting currency market expectations. Nevertheless, the trading limit does not eliminate the supply and demand of currency by itself, and it cannot be considered equivalent to the stable control of the dollar rate.

supply of dollars by the central bank; Another factor in the evolution of the currency market

Limiting Tether transactions was not the only measure taken by policymakers to calm the currency market. From Saturday, October 11th, the sale of dollar bills with a ceiling of 10,000 dollars for each national code began in five banks: National, Mellat, Tejarat, Saderat and Saman. The central bank also announced the plan to supply up to 2 billion dollars of banknotes.

Increasing the supply of currency can cover part of the market demand and reduce the intensity of buying pressure, but the effectiveness of this policy depends on the amount of demand, the way applicants have access to currency, and the expectations of economic operators.

The downward trend of the price of Tether in the last week

In recent days, with the implementation of Tether restrictions and the start of the supply of dollar bills, the exchange rate in the open market also fell back from higher levels. This synchronicity could be important in explaining Tether's downward trend, but the available information is insufficient to determine the exact contribution of each policy to the price decline. Even the published reports about the first days of the implementation of the restrictions showed that the initial drop in the exchange rate did not last long and the price of Tether increased once again.

Why does the price of Tether continue to fall despite the restrictions?

The recent drop in the price of Tether should be examined in connection with the general developments of the currency market. The Toman price of Tether is not only dependent on the limitations of cryptocurrency exchanges; The free dollar rate, inflation expectations, demand for dollar-denominated assets and the amount of currency supply also play a role in determining its price.

In recent days, the free dollar rate has also had a downward trend. Market reports on Tuesday 21 Mehr indicate that the dollar retreated to the range of 260 to 263 thousand tomans. A decrease in the dollar rate can put downward pressure on the price of Tether, although the rate difference between exchanges and the difference in supply and demand conditions may cause the price of these two assets to not move exactly the same.

Another factor is the change in behavior of traders after the period of price increase. When the exchange rate rises rapidly, part of the demand may be formed with the aim of preserving the value of the asset or making a short-term profit. As the price decreases and expectations change, part of this demand subsides and the buying pressure decreases.

How effective was the Tether limit in reducing the price?

The comparison of the price of Tether before and after the implementation of the Central Bank's order shows that the rate reduction coincided with the implementation period of the restrictions. However, the simultaneity of two events is not enough to prove a cause and effect relationship; Especially since during the same period, the supply of dollar bills increased and the price of the free dollar also changed.

From a policy point of view, restricting night trading can reduce the possibility of traders' immediate reaction to news in a part of the market. But if the demand to buy foreign currency is formed due to inflation concerns, economic uncertainty or the real need for foreign currency, the trading hour limit does not necessarily eliminate that demand. Some of the transactions may be transferred to other hours or different trading routes.

Therefore, the drop in the price of Tether in the past days cannot be considered only as a result of the Central Bank's order. Trading restrictions, the increase in the supply of banknotes and the decrease in the free dollar rate are all factors that can be investigated, but determining the extent of each effect requires more accurate market data.