Markets have factored in the fee imposition by Chinese exchanges so we are entering a period of Bitcoin price stability.
Chinese exchanges started levying a fee for investors and traders starting Jan. 24, 2017. This followed the decision of the People’s Bank of China to conduct on-site inspections. The decision of the Chinese exchanges to impose fees was clearly a move to stay in business and compliant with the demands of the central bank. While these exchanges may now be on the ‘right side of the law’ in China, the long-term effectsof this move will be felt for some time to come.
Trading slows down to a trickle
The immediate effect of the imposition of the fee by the exchanges in China such as Huobi, BTCC and OkCoin has been the fall in trading volumes. On the day the ban was imposed, Bloomberg reported:
“One-hour volume at OkCoin fell 89 percent to 1,026 Bitcoins at 1 p.m. local time, from 10,062 during the same period on Monday, according to the venue’s website. Huobi and BTC China saw declines of 92 percent and 82 percent respectively. Prices were little changed at around 6,350 yuan per Bitcoin.”
It would appear then that moves like cross-exchange arbitrage have ended for good in China. We are now entering a new era where speculative trading may not be a thing at least for the near future.
The only worry being that other markets such as Japan still have zero fee trading, which is leading to spikes in volumes there.
Lack of Volatility is a good thing
The lack of volatility in Bitcoin even amidst declining volumes is a good thing. One it proves that Bitcoin is able to weather the storm in China and the second thing is that it is apparent that China is still a market leader when it comes to volumes despite the fall in numbers. The chart below shows fall in volumes dramatically after the fee was levied. As you can see even though the volumes have declined sharply, the Chinese exchanges have maintained their leadership in volumes.
Bitcoin prices in the meanwhile have remained fairly stable. In fact, they have even shown appreciation. If markets have spoken, they have said that this lack of volatility is a good thing.
Markets have factored in China
Bitcoin price movements due to China are something that the markets have taken into consideration. We can say then that the action of the Chinese regulator has put a smaller dent into Bitcoin price then it could have. Bitcoin media including Cointelegraph have been in part responsible for this. We have covered the China story from the beginning and informed our readership about the PBOC story as it developed. While some may have argued that there was no story surrounding PBOC other than ‘routine inspections’, the fact remains that the volatility in Bitcoin price stemmed from the Chinese exchanges and if we have come to an era where wild fluctuations in Bitcoin are a thing of the past, we should welcome in that era. A more stable Bitcoin increases its functionality as a currency and inspires more confidence. Slow and steady is the wave of the future.