According to Michael Telvi, the government of China has confirmed that the country’s control over the global bitcoin exchange market has fallen from 90 percent to 1 percent.
The UK publication also noted that “experts in China fear losing control” over the cryptocurrency exchange market.
Never Was 90%, Obvious Drop to 1%
The absurdity of local experts expecting a different outcome than China’s cryptocurrency trading activity dropping by a significant margin has to be highlighted, because the government of China banned cryptocurrency trading as a whole in 2017.
In early 2018, the Chinese government tightened its ban on cryptocurrency trading by requesting local banks to prevent dealing with crypto exchanges and trading platforms.
Given that it is illegal to trade cryptocurrencies in China and crypto exchanges are not permitted to operate within the region, it is illogical to expect the trading activity of the Chinese crypto exchange market to not record a major drop.
The majority of investors in China that still continued to trade cryptocurrencies like bitcoin and ether subsequent to the ban imposed by the People’s Bank of China (PBoC) moved to the cryptocurrency market of Hong Kong.
The sudden move of millions of investors into what was once a minor crypto exchange market fueled crypto trading platforms in Hong Kong, leading major platforms to demonstrate a premium on the price of major digital assets.
Another false claim that the so-called local experts have made over the past week is that China had control over 90 percent of the bitcoin exchange market. Many reports in 2017 have revealed that the daily trading volumes of Chinese exchanges in early 2017 were inflated by bot trading due to no-fee trading policies that were in place.
After local exchanges were requested to implement a no-fee policy, the trading volume of bitcoin exchanges in China dropped by 80 percent, implying that China, even at its peak, really only had about 10 to 20 percent of the bitcoin exchange market.
Isn’t Chinese Government Optimistic About Crypto?
The Chinese government has openly funded blockchain projects in China, which were born and created in China. Its policy regarding cryptocurrencies and blockchain projects is nearly identical to its policy pertaining to Western social media platforms, search engines, and content sharing sites.
China banned Google, Facebook, and YouTube to allow Baidu, WeChat, and Youku to dominate the local market. Similar to that policy, China has expressed its support towards platforms like VeChain, Qtum, and up-and-coming blockchain projects that were created in China and are based within the country.
Analysts have speculated that the Chinese government had banned crypto trading to enforce strict capital controls, primarily to prevent the Chinese yuan from leaving the country. While the ban could be reversed if enough demand is created by local investors, it is unlikely that China will unban crypto trading in the near future, as its ban was never really about crypto but its strict capital controls.