Messari: Underground Dollar Boom Stablecoin Arbitrage in Emerging Markets

Author: Khurshed Murtazaqulov, Messari Intern Analyst; Translator: Jinse Finance xiaozou

Recently, I wrote a professional report for Messari, and I will summarize the key points of the report in this article.

Stablecoins are rapidly expanding in emerging markets.

What is the phenomenon that is most severely overlooked and neglected in the public eye? It should be arbitrage trading. Now let’s take a look at the importance of arbitrage trading and why it is not a bad thing for emerging markets.

The initial cryptocurrency trading was conducted in a peer-to-peer (P2P) manner through forums like BitcoinTalk or LocalBitcoins. Today, the P2P markets of Binance and Bybit have replaced these platforms, while fintech companies continue to venture into emerging markets.

Among many emerging economies, the P2P market of centralized exchanges (CEX) has become the main channel for the inflow and outflow of fiat currency.

The P2P exchange mechanism in emerging markets allows users to exchange USDT for more local currency, which naturally creates demand from remittance senders and arbitrage traders.

The existence of the price difference is because: the exchange rate of centralized exchanges (CEX) is determined by the market, is not controlled by the government, and is basically not regulated.

For example, Russian freelancers can currently earn 7% more rubles through Bybit’s P2P market compared to banks. Faster and lower-cost remittance methods create natural demand and can provide better exchange rates.

The P2P market of centralized exchanges plays a crucial role in the exchange of stablecoins and fiat currencies. Binance leads the P2P market with 119 fiat currency trading pairs. In just the past 24 hours, the total trading volume of the three major exchanges (Binance, Bybit, and OKX) has surpassed $500 million.