China’s bitcoin market: another ticking time bomb?

By the age of 34, Ding Wen had built up a personal fortune of more than two million yuan after years of hard work at an internet company in Nanjing, in east China’s Jiangsu province.

But he saw most of that wealth go up in smoke on January 5, when China’s bitcoin market crashed, sending the price of the virtual currency plunging 40 per cent in just a few hours after lunch.

With the market in free fall, Ding was unable to log into his account with China’s biggest bitcoin trading platform, Huobi, meaning he could not sell off his holdings or top up his principal to meet the margin call.

By the time he managed to log on in the evening, most of the bitcoins in his account had been compulsorily sold off by Huobi for 6,361 yuan each, lower than his purchase price of 8,101 yuan. This included the part of his investment he had bought using a loan he obtained from Huobi by pledging the bitcoins he owned originally.

“I have taken on big risks when making leveraged betting, but the collapse of the trading system made me unable to run stop-loss orders, so I think the platform should compensate for investors’ losses,” Ding said.

Ahead of the market crash, Ding had borrowed 9.95 million yuan from Huobi by pledging a principal consisting of the 409 bitcoins he already owned. He then bought a further 1,228 bitcoins with the loan.

Most of his holdings were compulsorily sold out by Huobi during the price collapse while he was unable to access his account.