China has a love-hate relationship with cryptocurrency, but that does not mean that there are no cryptocurrency enthusiasts in the East Asian country. The government may be uncertain about its crypto rules, however, data on virtual exchanges and analytic platforms shows that its citizens are active participants in the crypto market.
In September 2017, China’s financial authorities, as well as the People’s Bank of China, took a bold step to ban Initial Coin Offerings (ICOs). This came at a bad time since new crypto projects relied on it to raise funds and about 18 percent of such funds were made using the Chinese Yuan (CNY). The law also impacted on Bitcoin’s price which fell sharply from $4,975 at the time, to $ 3,238.
The ban was not the last of its kind because a month later, the Chinese government also banned local Bitcoin or cryptocurrency exchanges. Like the latter, a wave of panic was stirred in the crypto sphere and a sharp blow was dealt on Bitcoin whose price plummeted from $8,000 to $7,000 even though it was still able to get to its all-time high of $20,000 without China’s help.
Despite these measures taken by the government to protect its citizens from investing in an unregulated market and using unregulated exchanges, data shows that a good number of people in China have been investing in Bitcoin, Ether, XLM, and other assets. Panews’ research, for instance, which was published in December 2018 revealed that 1 out of 7 Chinese citizens have invested in Bitcoin.
More data from the research also showed that out of 4,200 Chinese citizens who partook in Panew’s survey, 98 percent admitted that they had heard about cryptocurrency either from a friend or family on social media.14 percent (598 respondents), on the other hand, revealed that they have invested in crypto assets after purchasing it from an exchange, receiving it as an airdrop, or from mining. 40 percent of respondents said they are willing to invest in cryptocurrencies in the future.
Another prove that the Chinese community is actively involved in the crypto space, is data from a number of cryptocurrency exchanges such as LocalBitcoins and Paxful. While the government may have successfully banned domestic exchanges, citizens can still invest in international exchanges.
For example, cryptocurrency exchanges such as HitBTC and Fatbtc reported an increase in the Chinese Yuan (CNY) and Bitcoin trading volume. Within two weeks in March, the trading volume in CNY spiked to 25.4 million yuan ($3.7 million). Coinlib.io, a statistical website also revealed that $161.3 million worth of CNY had flowed into BTC markets. Similarly $74.1 million worth of CNY flowed into ETH markets and $19.7 million into CNY/XLM trades.
Anton Pagi also noticed the sudden hike in trading volume on the part of China investors and stated on March 17, 2019, that:
“$BTC something to watch during this bull run, Chinese profits from their roaring stock market in recent weeks flowing into #Bitcoin. Largest Chinese exchange has more than doubled volume in the past week.”
It is also worthy to note that China’s National Development and Reform Commission (NDRC) on April 8, 2019, classified Bitcoin mining under a list of sectors that should be eliminated. The aim of economic planning agency’ aim was to totally ban mining operation in the region which it believes “lacked safe production conditions, seriously wasted resources, polluted the environment.”
Nonetheless, the news was unable to bring down Bitcoin’s price which had began a rally on April 2, 2019. It can be concluded that unlike past events in the country which were able to drag down Bitcoin’s price, the most recent one was unable to do any damage which shows news emerging from China are no longer taking a toll on the market like before.
There were expectations that it would’ve because the largest Bitcoin mining farms are in China. Bitcoin mining in itself is an operation that allows transactions to be confirmed and added to the blockchain. As such, if a region which controls most of the Bitcoin mining power in the world is banned from mining Bitcoin, a lot could go wrong.