China, with its high-pace economy, certainly plays a significant role in the Bitcoin space, but with the recently released Goldman Sachs report, it is becoming even clearer just how much impact the country has on the nascent cryptocurrency industry.
The report indicates that almost 80% of bitcoin trading volume during the last six months involved China's fiat currency, the Yuan. Surprisingly only 19 and 1 percent of transactions were traded with USD and EUR, respectively.
The cryptocurrency craze in China still continues despite the fact that the People's Bank of China (PBOC), the country's central bank, banned Bitcoin transactions at banks, retailers and payment firms, including Alipay and Tencent. However, Chinese exchanges such as OKCoin and BTCChina apparently found some loopholes to bypass government restrictions. Impressively, trading volume has increased despite bitcoin’s precipitous price drop from its record high of over 1,000 USD to 300 USD.
The Goldman report highlighted:
“Concerns over fluctuations in bitcoin prices won't apply to money transfers due to the speed of the transactions and the fact that customers are given rates in advance.”
In addition to the significant BTC trade volume, China is also considered to be the mining hub of the world. Due to cheap electricity and developed infrastructure with low-cost hardware manufacturers based in China, the country not only trades most of the bitcoin, but also produces most of the coins.
This Bitcoin surge in China is related to the strong economy of the country with its large capital outflow. However, it is important to note that bitcoin is traded with zero transaction fees on Chinese exchanges such as OKcoin, which makes it easier for users to execute large orders quickly and with little friction.
It is very interesting to see how the country is adopting Bitcoin in light of the price volatility and the fact that the government has been relatively silent, with the PBOC issuing only a single memo on December 5, 2013 warning national financial institutions not to trade in bitcoin.
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