Bitcoin bulls on the run, as value charges through the US$2,000 barrier

Trading volume in China down to 12 per cent of global aggregate, from 80 per cent last year due to tighter regulations

PUBLISHED : Monday, 22 May, 2017, 3:30pm
UPDATED : Monday, 22 May, 2017, 10:50pm

Bitcoin, the world’s most-popular cryptocurrency, has surged to US$$2,168 per coin, and is still rising, after soared more than 65 per cent in the past month, fueled by rising demand and speculation.

Its price here reaching 14,180 yuan (US$2,058) per coin on Monday, almost twice its January low value of around 4,092 yuan.

“The latest bitcoin bull run has little to do with China, as trading activities have been largely curbed after China’s central bank banned leveraged trading on the coins, while urging trading platforms to charge trading fees [since the start of the year],” said Xiao Lei, a bitcoin expert and chief analyst with online gold trading platform, G-banker.

Volumes in China now account for less than 12 per cent of all global bitcoin trading, down from 80 per cent a year ago, according to research report issued by Huobi, one of China’s top three bitcoin trading platform.

Leveraged trading and speculation in China fueled a global bitcoin rally in 2016, but the market crashed at the turn of the year, as the trading price of the virtual currency plunging 40 per cent to below 5,000 yuan in just a few hours, after lunch on January 5.

The People’s Bank of China (PBOC) has since launched regular inspections on bitcoin trading platforms, and introduced tighter regulations on their trading practices.

Rumours have been circulating that the central bank now plans to issue formal rules on the market, starting in June, with an emphasis on anti-money laundering and stricter compliance requirements.

“The PBOC is trying to stop individual investors from using the bitcoin market as a form of gambling, however, the over-the-counter (OTC) market has continued expanding quickly, even after they imposed those stricter checks on trading platforms earlier in the year.

The PBOC is trying to stop individual investors from using the bitcoin market as a form of gambling, however, the over-the-counter market has continued expanding quickly, even after they imposed those stricter checks on trading platforms earlier in the year
Xiao Lei, a bitcoin expert and chief analyst with online gold trading platform, G-banker

“The regulator wants to bring trading back within the auspices of official trading platforms, otherwise supervision would be even more challenging for what has become a fragmented OTC market,” Xiao said.

Cheung Chun-yin, a PwC China fintech partner, said globally, too, “demand for bitcoin is rising rapidly, and its investment channels expanding”.

Similar Initial Crypton-token Offerings (ICOs) programs, including Ethereum, which provides a cryptocurrency token called “ether”, are also growing in popularily both within and outside China, he said.

ICOs work in a similar way to initial public offerings (IPO) on traditional financial markets.

Investors subscribe to a share in a new start-up ICO offerings, with tokens given as rewards after usually crowd-funded sales of the ICO are complete.

Tighter government regulation, as has already happened in Japan, is seen by investors as positive as it indicates official acceptance of the cryptocurrency, Cheung said.

The Japanese government last month tightened its regulation of bitcoin trading in what was largely viewed by the market as its official acceptance of the world’s most-widely used and recognised cryptocurrency.

Japan has stipulated that bitcoin exchanges should register with the state and comply with know-your-customer and anti-money-laundering regulations.

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