Why we see the price differences between USDT VS USD?

[Crypto Library]

I don't know if this topic fit this board-

As we know that USDT pegged with the US dollar by 1:1 but If I went for the p2p trade on binance BDT/USDT then we will see that 1USDT=127+(as current price), but if we went for exchange USD on bank then we will get only around 123.50 per USD. If I look at the difference here, it's above 3%, which is a lot.
I have been trading p2p for about 6 years+ but I always see this difference here. I would like to ask you, do you see such a difference when buying/selling your own country's currency against the USDT & USD?
And if you do, could you kindly explain the reasons behind it.

Here is the source-
USD rate- https://www.bb.org.bd/en/index.php/econdata/exchangerate
USDT(binance p2p)- https://p2p.binance.com/trade/sell/USDT?fiat=BDT&payment=all-payments

[Charles-Tim]

Tether mint (create) and burn (destroy) USDT so that it can maintain the price peg with United States dollar.

If more people are buying USDT, the price will increase, but Tether have to mint more USDT just to make sure that the price do not increase so much further.

If more people are selling USDT, Tether will burn more USDT just to maintain the peg.

USDT is not the same as USD, Tether use its supply to control the price to maintain the peg.

[OgNasty]

You should provide links to these price quotes so we can see how the data is being presented and if it is true. I can’t imagine it to be honest. That would be the easiest arbitrage opportunity of all time. I think all those sorts of opportunities went away in the 2018-2021 cycle. If not, take advantage of free money when it comes your way.

[Crypto Library]

You should provide links to these price quotes so we can see how the data is being presented and if it is true. I can’t imagine it to be honest. That would be the easiest arbitrage opportunity of all time. I think all those sorts of opportunities went away in the 2018-2021 cycle. If not, take advantage of free money when it comes your way.

Here is the source-
USD rate- https://www.bb.org.bd/en/index.php/econdata/exchangerate
USDT(binance p2p)- https://p2p.binance.com/trade/sell/USDT?fiat=BDT&payment=all-payments

But TBH, it is actually kinda advantage when you earn only USDT or crypto but when you earn USD from others channels or Platform then it might be grievance. 

[Stalker22]

~
I have been trading p2p for about 6 years+ but I always see this difference here.

So, you are comparing different markets for different coin pairs?  You are not comparing markets for the pegged coins.  

Prices on P2P markets are determined by supply and demand.  But when you want to exchange USD in your bank, you hit the wall of institutional currency controls and regulated banking spreads.  I believe that your bank uses official central bank exchange rates that artificially keep the local fiat currency stronger than free-market supply dictates.

[Alpha Marine]

I think I can understand and relate to what you're saying.
I can mention two reasons for this.
One is that there is a black market price and an official price. Like most things, the black market price is higher than the official price. So that is why the rates of banks and other financial institutions are relatively lower than those of crypto and exchanges.

The second point I have is that banks actually buy it from you, so they need a price where they can sell and make profit, while in P2P, you are simply exchanging, so they don't need to lower the rates.
I don't know if it's like that in every country, but if you walk into most banks in my country, you'll see a digital board that shows how much they buy foreign currencies and how much they sell it.
You can see something like:

We buy
$1-150
£1-200

We sell
$1- 155
£1- 205

So you see that the buying rate and the selling rate are different.

[GeorgeJohn]

I don't know if this topic fit this board-

As we know that USDT pegged with the US dollar by 1:1 but If I went for the p2p trade on binance BDT/USDT then we will see that 1USDT=127+(as current price), but if we went for exchange USD on bank then we will get only around 123.50 per USD. If I look at the difference here, it's above 3%, which is a lot.

Their's something you need to know between them...When you made mentioned of usdt and usd, you will know that this two is operate in two different ways, despite that both operate in centralized form, but price are differs due to the demands and supply imbalance in the market and liquidity differences..secondly, trading in exchange and trading in bank, it do have different rate, and the rates of the bank always be lower than the one of exchange, du to exchange has to do with crypto usdt, with high volatility that makes the market to go higher than usd.

[Bd officer]

I also thought about it at first, but after looking at some aspects, I understood the matter. We know that USD is bought and sold at the price set by Bangladesh Bank, there is no opportunity to buy and sell at a lower or higher price than this. But USDT exchange is completely illegal, here the price is more or less depending on the demand of buyers and sellers.

And by buying dollars from P2P, you can easily make international payments with USDT and many people buy USDT for crypto trading, so they buy at a price 3% higher due to the liquidity crisis. The USD price has been almost stable for some time, but sometimes it is seen as 1USDT=129BDT. You will see below that many people have ordered at a rate lower than the bank's rate, 1USDT=116BDT, 115BDT, etc. What can you say here?
Anyway, we are getting good benefits from this.

[viljy]

USDT has long been more expensive than the official dollar exchange rate, let alone the bank’s purchase rate, which is lower (due to the bank’s margin). One reason is that the money is dirty - often stolen money (for example, from phone scammers), which criminals are willing to convert into USDT even at the cost of losing a large percentage on the exchange.

Generally, before the epidemic of phone scams, the situation was the opposite, because P2P wasn’t filled with dirty money like it is now. This is the situation with the ruble. Apparently, the situation is similar to other currencies. The USDT exchange rate depends on the volume of dirty money in the P2P market.

[Opiate32]

The difference comes down to how each market operates. USDt may be pegged to the dollar but it doesn’t mean that it will always trade the exact same rate as USD in every market. In countries where the access to foreign currency is restricted or demand for USDt is high, people will be willing to pay extraordinary for USDt because it is easier to acquire and transfer than traditional USD through banks. So the difference you’re seeing is not a change in USDt dollar peg but a difference in the local market price of accessing each one.

P.S:  On P2P platforms the price is influenced by demand and supply, payment method, liquidity and the risks that traders take when dealing with buyers and sellers.

[Sim_card]

 have already said the answer in your post. I call it little difference and that's due to their different exchange rate and demand. Down here in my country, the amount to buy/sell USD fiat from the bank is different from the black market rate. Black market use to be higher a bit in price because bank will give you their own charges and that will affect their exchange rate.

However, I prefer to hold USD fiat in the bank than USDT because it's pegged to USD fiat and can be depegged any time or your USDT can be frozen in your wallet.

[bitmover]

I don't know if this topic fit this board-

As we know that USDT pegged with the US dollar by 1:1 but If I went for the p2p trade on binance BDT/USDT then we will see that 1USDT=127+(as current price), but if we went for exchange USD on bank then we will get only around 123.50 per USD. If I look at the difference here, it's above 3%, which is a lot.

It depends on the bank you use. You are using a bank that charges an extra fee.

I use a bank which allows USDT deposits and charges nothing for it, ARQ (https://arqfinance.com), i dont know if it works in your region.

Also, in Brazil there is a small spread in USDT price (from 0.2% to 0,8% usually), so we pay a little extra to buy USDT from BRL.

These small costs are normal, because of supply and demand. Basically to cover trading costs and taxes of USDT owners.

[noorman0]

-snip-
If I look at the difference here, it's above 3%, which is a lot.

Does -3% represent the last successful execution price or the highest bid price at that moment? If you are looking at a trading pair where the order spread tends to be wide and trading volume is low, the stated price does not always reflect the actual transaction price. You might even encounter such discrepancies between USDT and USDC.

[Jostle]

I've done P2P before. It's usually slightly cheaper P2P, as compared to going through a CEX. Probably 0.5% cheaper.

But the risks are there. For P2P, someone has to send first, no escrow.  So it's still physically risky.

[TastyChillySauce00]

Technically USDT is an IOU, market price slight deviation is tolerable and you'll only get true 1:1 when you redeem it directly through Tether. However in this case, you're mentioning P2P and several countries P2P market are known to charge premium for every dollar, therefore it's to be expected especially in a country that haven't yet legalized crypto or stablecoin use in this case, the P2P charge more with huge spread because they know there is risk.

Basically, the reason there is spread is not because the USDT itself but because the region's specific market difference and regulation, USDT is still pegged 1:1 with tiny amount of difference on open market. As far as I know, Bangladesh still prohibit crypto. I could be wrong.