Chinese Bitcoin traders are exerting “enormous influence” despite the raid


In this photo illustration, the Bitcoin logo can be seen on a mobile device with the flag of the People’s Republic of China in the background. (Photo illustration by t / SOPA Images / LightRocket via Getty Images)

Budrul Chukrut | SOPA pictures | LightRakete | Getty Images

GUANGZHOU, China – Chinese bitcoin traders continue to thrive despite Beijing’s four-year crackdown on cryptocurrencies, experts told CNBC.

On Friday, Chinese Vice Premier Liu He said it was necessary to “curb Bitcoin mining and trading behavior” in order to avoid risks to the “social sphere”. The Chinese authorities have long been concerned about the speculative nature of cryptocurrencies and their risk to the stability of the financial system. The latest remarks by the Deputy Prime Minister have raised fears that the procedure will be tightened.

But harsh words from Beijing are not new. In 2017, China closed local cryptocurrency exchanges and banned Initial Coin Offerings (ICOs), a way of raising money for crypto companies by issuing digital tokens.

In November 2015, according to data from CryptoCompare, a cryptocurrency data company, around 92% of Bitcoin trading was in the Chinese currency, the renminbi. Chinese traders have had the opportunity to significantly move the market on any bitcoin-related news in China. However, as of November 2017, the Chinese renminbi only accounted for 0.07% of the total bitcoin market.

However, this obscures the fact that Chinese traders still remain a significant force in Bitcoin trading, according to Matthew Graham, CEO of Sino Global Capital, a Beijing-based venture capital firm focused on blockchain technologies.

“The dwindling influence of Chinese bitcoin traders is an exaggerated story,” Graham told CNBC. “The fact is, Chinese traders are still very influential.”

China’s role in Bitcoin was brought back into the spotlight last week after authorities reiterated that financial institutions should not get involved in cryptocurrency businesses like trading or exchanging fiat for digital coins. These weren’t new regulations.

But it was one of the reasons Bitcoin slumped last Wednesday, falling 30% at times to just over $ 30,000 before recovering.

Chinese investors also sold, but other factors may have motivated their trades.

“For the sake of clarity, anecdotally shy Chinese retail investors were heavily involved in yesterday’s sell-off. But this was more a function of price movements than anything else related to local regulations,” Graham said Thursday.

What happened to the Chinese Bitcoin trading?

When China took a closer look at the cryptocurrency sector, a kind of gray market emerged. Chinese exchanges such as Huobi and OKEx relocated abroad because they could not be admitted on the mainland.

Some of these platforms offer crypto-to-crypto trading, e.g. B. the purchase of Bitcoin with the stablecoin linked to the US dollar called Tether (USDT). Some platforms offer a Renminbi to USDT conversion service that enables Chinese users to get the crypto they need to buy Bitcoin.

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“Once someone has bought Bitcoin, they can deposit it on foreign exchanges that allow trading from crypto to crypto,” said Constantine Tsavliris, head of research at CryptoCompare.

In early September 2009, when China ordered local cryptocurrency exchanges to close, Bitcoin was trading at just over $ 4,000. On Tuesday, it was over $ 38,000, according to CoinDesk data.

“I think there are more (Chinese) dealers (now). Bitcoin has gained an order of magnitude in price, ”Bobby Lee, former CEO of one of China’s earliest cryptocurrency exchanges, BTCC, told CNBC.

“These days, more and more people are using stable currencies like USDT,” said Lee, who is also the founder of the Ballet cryptocurrency wallet.

“That means they no longer have to deal with RMB transfers, but switch to a USDT payment company and get Bitcoin on and off. It becomes an underground currency. “

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