The Bitcoin business world has been controlled by the Chinese market over the last three years, but there is a caveat. The massive volumes put forth by Bitcoin exchanges, BTCC, Huobi and OkCoin have not exactly been on the up-and-up. No-fee trading policies have inflated numbers dramatically, and national financial regulators have come in to begin a more legitimate system. The results have been significant in recent days.High-speed, automated traders have made Chinese exchanges their method of choice due to the lack of any real cost to manipulate these systems. The trading volume is done mostly to lower the costs of withdrawing funds, but when over 90% of the world’s trades are happening in just three exchanges, someone has to police the system that wasn’t doing a good job of policing itself.
Now that the regulators in China and the exchange's top executives have gotten together and made some working revisions that include trading fees, the trading volumes are now vastly different than they were just a week or two ago.
“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,” says Gary Gao of Bloomberg Business. “Huobi and BTC China saw declines of 92 percent and 82 percent respectively. Prices were little changed, at around 6,350 yuan per bitcoin.”
These changes can do a lot of good for the greater Bitcoin community. This may lead to less drastic price swings and less volatility. Investors overseas may see the industry as less centralized and move more capital into the market, now that the volumes are not so manipulated or concentrated. Also, fewer speculators and a better cross-section of actual users will be represented by the volumes.
“Overplaying China’s trade volume leads to the wrong conclusion that bitcoin’s value is purely derived from its role as a speculative plaything for Chinese investors, says Neil Woodfine, COO of Remitsy, and a local Bitcoin businessman in Beijing. “It leads people to make the mistake that there is (an) existential risk to bitcoin in the Chinese government’s treatment of bitcoin trading or just Chinese traders whimsy.”
These changes may be having an effect on Bitcoin’s price, as Bitcoin fell 2-3% on Tuesday, heading back under $900 USD as of this writing. After a massive bubble to start the year, Bitcoin is down about 6% so far in 2017.