Bitcoin trading in yuan drops as new transaction fees by exchanges take effect
Following the commencement of the move to start charging transaction fees by China’s BTCC, OKcoin and Huobi on Tuesday January in response to PBoC’s requirement to eliminate margin trading service, Bitcoin trading volume in Chinese yuan has dropped to its lowest for the year.
According to Bitcoinity which provides Bitcoin market data across major exchanges and currencies in various parts of the world, trading volume in yuan dropped from its 90.3% market share to as low as 43.3% in less than 24-hours after the new fees came into effect.
The zero fees arrangement by these exchanges was seen as the main reason why more of Bitcoin trading in China was automated. Now that lesser trading volume is expected on a daily basis for the next few days, it is not clear for how long the situation will remain so or the extent to which the situation will decrease volatility level.
Btcvol.info puts the latest 30-day estimate of Bitcoin volatility index level against the US dollars at 5.21% as at the time of this writing while its volatility against gold averages around 1.2% but other major currencies average between 0.5% and 1.0% to gold.
A reduced level of volatility – the measure of how much the price of a financial asset varies over time – will make the cost of converting into and out of the digital currency decrease as well.
From the look of things, the situation does not really favour day traders and those who speculate on the price of Bitcoin. As a result, there will be less profit for traders to make as price movements slip and exchanges now operate straightforward business models being cautious of the peering eyes of the People’s Bank of China
Rather, the situation is good for the regular investor in Bitcoin who prefers to see the currency maintain a stable price in the market. The good side to this is that such stability due to less volatility and less speculation may lure new users into buying into Bitcoin.
On the other hand, it could be said that this situation that was made possible by the PBoC’s earlier moves, favours exchanges using USD as transactions based on this currency have risen to 39.6% of the market from about 1% at the start of year. Also, exchanges using EUR for transactions rose to about 13% from a previous 0.2% on January 1.
In general, PBoC’s somewhat recognition of Bitcoin trading and introduction of a regulatory compliance is good for the market as it provides some clarity to how the market operates which could improve investor confidence in the long term. It may also strengthen the view that the current situation will be bearish with time as there is a larger number of Bitcoin users – and potential users – who want its price to be stable to be a true alternative currency.