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Have we just seen the end of fake Chinese bitcoin trading volumes?

Four Chinese bitcoin exchanges, including the three top exchanges in the world by volume, have each announced that they will start charging 0.2 percent fees on all trades, starting Tuesday the 24th.

Four Chinese bitcoin exchanges, including the three top exchanges in the world by volume, have each announced that they will start charging 0.2 percent fees on all trades, starting Tuesday the 24th.

Implementation of BTCChina Trading Fee System

“We are implementing fee-based trading to curb market manipulation and extreme volatility,” said BTC China CEO Bobby Lee on a Sunday morning tweet. Competitors OKCoin  and Huobi also told their customers of the changes that they have made at roughly the same time.

1/ BTCChina, our CNY exchange, will start charging fees for bitcoin and litecoin trading from 12:00 PM (noon) UTC+8, Tuesday, January 24th.

— BTCC (@YourBTCC) January 22, 2017

The first three identical announcements were released on Sunday morning, showing that they worked together and arranged to begin charging their customers fees at the same time. The following morning in China saw the Yunbi’s notice too, with the same fee and scheduled time for their change.

Other exchanges in the country that charge no fees exist, such as BTC Trade, CHBTC, and Jubi. It has yet to be seen which the traders will choose on Tuesday; the biggest exchanges with the most liquidity but a 0.2% fee, or the many smaller exchanges with no fees.

BTC CNY 7 day performance with CHBTC Jubi BtcTrade 24th Jan 2017BTC/CNY 7 day performance with CHBTC, Jubi, BtcTrade – 23rd Jan 2017

Although the move was designed to reduce bitcoin’s volatility, the market reacted negatively to the news on Sunday. Bitcoin’s price sank 6 percent over the hours following the first twitter announcement, dropping just below US$900 before rebounding.

The cause for the fee rate change was well documented and expected by many. Ten days earlier bitcoin’s price plunged on news of China’s Central Bank, the PBoC sending inspectors to all three exchanges in both Shanghai and Beijing offices, in order to investigate for themselves if the exchanges were manipulating trading volumes.

1/ A group of regulators consisting of the SH branch of PBOC, the SH Financial Affairs office & other related govt agencies visited BTCC.

— BTCC (@YourBTCC) January 11, 2017

Starting soon after the inspection on January 11th, which tanked bitcoin’s price 16 percent before rebounding, the Chinese exchange volumes have sunk from highs around 94 percent of the global bitcoin trading volume, down to the present 70 percent at press time.  If traders at those exchanges look to other currencies to trade in order to avoid fees, the price could sink much lower on Tuesday.

The drop in bitcoin trade volumes from China on the 11th was just the start of the fallout from the PBoC’s visit, but some exchanges showed their response sooner than others. The only exchange to show an extreme drop-off in trading volume after the PBoC’s inspection was the number four exchange by Chinese volume, BTCTrade, for whom there is no evidence suggesting that regulators have visited.

BTC CNY Chinese Exchanges 14th Jan 2017

BTC/CNY 24hr performance chart, 14th Jan 2017

On January 14th the volume of bitcoins traded as reported by BTCTrade’s own price API feed dropped drastically from 772,770 to 53,582 Yuan traded within 5 minutes, a level it had not seen for years. Only a month before it was reporting that it had been trading 2.3 million in 5 minutes, but since the 13th BTCTrade’s daily volumes have stayed below 56,000, dipping to around 10,000 a few times.

The company has not made any changes to their existing fee-free policy so far, and has been keeping quiet about the volume change on their website and twitter account.

The fee rate adjustments are only the first of a few changes Lee has suggested will be coming to appease the Chinese regulators. As soon as the price stabilized, Lee took to twitter asking his followers if they’d like to consider using mBTC as the primary unit of bitcoin while trading. “Certain ppl think it’s bad when #Bitcoin prices rises too fast,” Lee tweeted. “To help w/ perception, #Chinese exchanges may move to trading in #mBTC.”

Like with the fee adjustment, Lee is planning to change the bitcoin unit of measurement on his site along with his competitors at other bitcoin exchanges in China. “The plan (#mBTC units) has been discussed amongst local #Chinese exchanges, & we believe it will appease the regulators, w/ "lower" prices,” he explained on twitter.

Many bitcoin wallets today allow users to toggle their units of bitcoin already, typically a three-way setting between bitcoins, ‘millibits,’ (mBTC) and ‘bits,’ which refer to one millionth of a bitcoin. “Ech #Bitcoin will get a 1,000-for-1 split, and become 1,000 mBTC,” Lee explained to his customers. In response to his tweets, both on twitter and Reddit, many called instead for a switch to ‘bits’ instead of mBTC.

|

Unit

|

Value in BTC

|

@ $1000 per BTC

|
|

BTC

|

1

|

$1000

|
|

mBTC

|

0.001

|

$1.00

|
|

uBTC

|

0.000001

|

$0.00

|
|

Satoshi

|

0.00000001

|

$0.00

|

If all three of the most popular bitcoin exchanges in the world switch to millibits or bits, thousands of traders would be using the new unit daily, which could be the start of a greater push to popularize the usage of that unit worldwide.

Both the loss of fake trading volume and the plan to switch bitcoin’s units in China are being hailed as great news for bitcoin in the forums and chatrooms. Several highly optimistic opinions can be seen across all bitcoin social media outlets about the move, despite the obvious loss in price since the first announcement.

While being forced to pay fees on trades is certainly unhappy news for the bitcoin market traders, the general feeling is that Bitcoin itself could gain a lot of stability and credibility in China from the move.

“The People’s Bank of China has essentially just given general Bitcoin trading an explicit blessing,” noted user therflar on Reddit, “selectively limiting only certain types of activities on the exchanges and providing clarity with regards to regulatory compliance.”

Even some traders felt the news was more positive than negative. Reddit bitcoinmarkets forum trader moononrainbow noted that “This is one of the best news we could have expected from the Chinese exchanges. As Bobby Lee said, this move is intended to "appease" the Chinese authorities and I believe it will.” He also mentioned that China will be “less of a leader on price,” meaning that the rest of the world won’t have to suffer so much from the effects of China’s local problems in bitcoin’s price like we did on the 11th.

“This move brings the Chinese exchanges on par with most other exchanges around the world, and will likely reduce their volume.”

  • moononrainbow

Meanwhile, the second largest currency to trade against bitcoin, the Japanese Yen, has doubled their marketshare recently to 16.7 percent of global bitcoin trade. Due to leading Japanese exchange Bitflyer’s policy of having zero fees on trading bitcoin,  the company and competitor Zaif are in the same position as the three Chinese companies, and may one day have to halt their fee-free trading as well. Until then, Japan is in excellent shape to grow the market faster now that internet giant GMO is entering the bitcoin exchange business.

BTC JPY 30 day performance chart 24th Jan 2017BTC/JPY 30 day performance chart, 23rd Jan 2017

Other bitcoin exchanges in Japan like Coincheck do charge fees, however it has yet to be seen how GMO will set their fee schedule. If they decide to forego fees and become more popular than Bitflyer is, inflated bitcoin volume problems could be trading one Asian country for another.


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