China Bitcoin OTC Report: 100mln USD Traded Over 3 Platforms in Fortnight
30 Oct, Beijing-Right before exit of most Bitcoin Exchanges in China, IFCERT released a report on OTC trade against CNY. Over 680 million yuan worth of trading are observed on 3 platforms in 2 weeks. The report disclose statistics concerning volume etc. Surprisingly, Coincola, a HK-based OTC platform, accounts for 70% of the trading volume, overtaking localbitcoins and paxful. Below is the full text translation.
As an important link in the ecosystem of bitcoin and other cryptocurrency, the exchange between Bitcoin and fiats plays an vital role. Usually, the trading could be divided into exchange-trading and OTC-trading. Bitcoin OTC trading has a longer history than exchange trading. OTC trading does not require a fixed place, a permission-based membership or a strict rules system. In most cases, it’s peer-to-peer transaction through private negotiation. IFCERT has conducted monitoring work over recent OTC trading and the following report is compiled.
1. Types of OTC
Bitcoin OTC trading could be categorized as follows: online P2P, online B2C and offline trading.
1.1 Online P2P
Online P2P transactions are generally conducted through LocalBitcoins, CoinCola and other OTC trading platforms. This type of website offers Bitcoin buyers and sellers a platform to exchange information and its model is similar to the “Taobao” model: buyers and sellers trades BTC based on the information displayed on the platform. The specific flow is as follows.
User Registration: Both sides register on the platform and fill in corresponding information, generally they are not required to do real-name authentication.
Release trading information (Ads): Both parties publish Buy or Sell information on the platform. The seller must deposit bitcoin to the platform. The platform act as a middleman from the transaction and charge a certain percentage of fee from each successful trade.
Trade Lock-in: similar to the “Taobao” model, the buyer enter a certain amount of Bitcoin that he wish to buy then the platform will freeze corresponding amount of Bitcoin from the seller’s balance.
Payment: According to the mutually-agreed payment method, the buyer pays the seller and provides proof of payment. There are plenty of payment options: bank transfer, cash remittance, third party payment, gift cards and so on. Alipay, WeChat and bank transfer are the most popular payment option for BTC-CNY trade.
Confirm receipt of payment: After confirming receipt of payment, the seller press the release button and the platform automatically releases Bitcoin to the buyer.
1.2 Online B2C Trade
Users can buy or sell Bitcoin directly with the platform. Bitcoin price is specified by the platform. After receiving the user’s payment, the platform will directly release Bitcoin to the buyer’s account. Or release funds to the seller’s account after receiving Bitcoin. Bitcoin or funds on the B-side funds are from the platform or cooperative partners.
1.3 Offline Trade
Buyers and sellers negotiate online or offline through online chat tools such as QQ group, wechat group, Telegram group, Slack group, or face to face talk.
2. OTC trading platform
After the regulatory policy was released in September, domestic OTC platforms like Bitkan and BTCT gradually exited the market. At present 4 OTC platforms that domestic users used most frequently are all located abroad. They are LocalBitcoins, Paxful, CoinCola and BitcoinWorld. OTC platforms are often not an subject to national boundary, which means they are open to all users in the world. For example, LocalBitcoins was founded in 2012, supporting 248 countries, and has users from more than 15,000 cities, including RMB users.
In terms of CNY payment methods among CNY dealers, the monitoring results show that since 2017, 96.3% of the BTC-CNY tradings on Paxful are paid via Alipay with 2.7% by WeChat and 0.56% by Itunes gift card. A sample monitoring on LocalBitcoins found that 57% of the sellers chose payment by Alipay, followed by bank transfer, accounting for 28%. Similar monitoring in CoinCola’s found that 85% of the sellers chose payment by Alipay, followed by bank transfer, accounting for 12%.
3. OTC Trade Volume
The scale of BTC-CNY OTC is shown in Figure 1 (data from LocalBitcoin and Paxful). It can be found that OTC trade volume before February 2017 is relatively small. After the exchange banned bitcoin withdrawal in early Feb, the trading volume grew exponentially. Then the volume dropped as exchange allowed withdrawal after June 2017. With the ICO ban and policy change in early September, OTC transactions once again prosper. From the data of LocalBitcoin and Paxful, the ratio of BTC-CNY volume rose from 5% to 20% among the total volume, which is shown in Figure 2.
Figure 1 BTC-CNY Daily Trading Volume
Figure 2 BTC-CNY OTC trading volume
Volume of exchange trading is in opposite trending with OTC trading as shown in Figure 3. OTC trading volume dropped between February and May. Then the volume rose from June to August and declined since September. Current BTC-CNY P2P trading volume is only about 1/100 of the amount of earlier phase.
Figure 3: BTC-CNY exchange trade volume
By analyzing the BTC-CNY transaction data of LocalBitcoins, Paxful and CoinCola in the past two weeks, the total transaction volume of the three platforms was 680 million yuan, of which the Hongkong-based CoinCola increased significantly, accounting for up to 70%. The chart below shows the comparison of the turnover of the three platforms in the past two weeks.
Figure 4 Trading volume of OTC Platforms
Regarding the size of orders, 67% of the total orders are below 10,000 yuan and accounts for 14% of total amount. Deals between 10,000 yuan to 100,000 yuan accounts for 31% of total orders and 60% of total amount. Only 2% of deals are over 100,000 but they accounts 26% of total amount. The specific distribution is shown in Figure 5.
Figure 5 Distribution of Order Sizes
OTC trading is growing day by day with further development of Bitcoin. As OTC trading involves anonymous counterparts, various payment methods and fraudulent transactions, IFCERT will continue to monitor OTC activities.