SHANGHAI: Weeks after Beijing banned fundraising through token launches and ordered some bitcoin exchanges to shut, casting a chill over the cryptocurrency industry, traders say that the market is far from dead.
While several exchanges have announced that they will close by the end of this month, traders have now moved to buy and sell bitcoin directly with each other on peer-to-peer marketplaces and messenger apps. Industry insiders say some overseas-based initial coin offerings (ICOs) are still being marketed.
Although the crackdown has dissuaded large swathes of less-experienced investors from participating in the trade, market participants point to the limits Chinese regulators ultimately face in controlling the industry, where many users are anonymous and difficult to track.
In the short-run, the crackdown has also created an arbitrage opportunity for investors, with the price of bitcoin in China now trading at a discount to overseas exchanges.
The Chinese government on Sept. 4 ordered ICOs to cease and soon after ordered some cryptocurrency exchanges to shut. Over 15 exchanges, including the three largest players OkCoin, Huobi and BTCChina, have since announced that they will close their mainland businesses by the end of September.
While the clampdown caused the bitcoin price in China to tumble as much as 8 percent on the day of the announcement, it has since recovered to 24,101 yuan ($3,615.67) on Chinese exchange Huobi. On U.S. exchange Bitstamp, it currently trades at $4,205.
Trading has spiked generally on peer-to-peer marketplaces, according to data website Coindance. On OTC platform LocalBitcoins, China trading volumes more than doubled in the week starting Sept. 16 from the previous week to 74 million yuan. It hit an all-time high in the week starting Sept. 23, reaching 115 million yuan in trades.
Volumes on Paxful, another smaller marketplace, also jumped to 1.7 million in the week beginning Sept. 23, up from 351,102 in the previous week, Coindance data showed.
Michael Foster, co-founder of localethereum.com, an over-the-counter marketplace for ethereum trading, said mainland China users accounted for a fifth of its 5,000 signups since it opened for registration on Tuesday.
Other Chinese cryptocurrency players said traders were also moving away from using Tencent’s WeChat app, to encrypted messenger app Telegram to avoid regulatory scrutiny.
Some said they were still seeing overseas-based ICOs being marketed in China. The September 4, shutdown of ICOs stipulated that Chinese citizens were not allowed to invest in ICOs. Overseas ICOs have been returning money on a voluntary basis.
