On May 31, local Chinese Bitcoin and cryptocurrency news source cnLedger reported that OKCoin China resumed withdrawals for traders.
BREAKING: We received report that OKCoin (CN site) resumed withdraws!
W/d limit based on vip level, starting from 10BTC/200LTC/1000ETH daily
— cnLedger (@cnLedger) May 31, 2017
OKCoin is the largest Bitcoin exchange in China which processes 31 percent of trades within the Chinese Bitcoin exchange market. In February, OKCoin and Huobi, the two largest Bitcoin exchanges in China, were flagged by the People’s Bank of China for operating a trading platform without appropriate Know Your Customer (KYC) and Anti-Money Laundering (AML) systems.
The troubled times
Consequently, the two exchanges were asked to suspend withdrawals until future notice and in the meantime, the two exchanges along with other trading platforms in the market implemented new KYC and AML systems on par with the country’s financial regulations.
From February to May, Bitcoin was being traded on the Chinese exchange market at a substantially lower price and value compared to other major markets such as the US, Japan and South Korea. Because traders couldn’t withdraw Bitcoin they held on exchanges, the demand for Bitcoin decreased and, ultimately, the majority of traders moved from regulated exchanges to over-the-counter (OTC) markets such as LocalBitcoins.
For several months, Bitcoin was being traded in China at a value around 25 percent lower than other markets. As a result, the global average price of Bitcoin declined and the Chinese market presented a massive arbitrage opportunity. The Chinese market’s decline in demand toward Bitcoin and decreasing Bitcoin price led to global market instability for Bitcoin and held Bitcoin price down for months.
Back on track
On May 31, the Chinese exchange market finally recovered, with the OKCoin trading platform’s withdrawal resumption acting as a catalyst to trigger the interest and demand for Bitcoin from local investors. Currently, Bitcoin is being traded in China at a premium rate, which the global market hasn’t seen since last year.
The global average Bitcoin price at the time of reporting is $2,300 and traders within the Chinese Bitcoin exchange market is trading Bitcoin at over $2,340, around $50 higher than that of the US. In comparison to South Korea, which is demonstrating a $400 premium, the premium rate of the Chinese market is significantly small. However, the recovery of the Chinese Bitcoin exchange market is a positive sign of growth and recovery for the global market.
Due to extensive mainstream media coverage of Bitcoin as digital gold in China, the demand for Bitcoin within the country and amongst local traders has already been on the rise.
People’s Daily (China’s biggest newspaper): Bitcoin becomes “digital gold”. High risk, high expected yield. BU/SegWit may soon help it scale pic.twitter.com/RODqhnJlPa
— cnLedger (@cnLedger) May 26, 2017
The resumption of withdrawals by OKCoin will further fuel the growth of the Bitcoin market in China and when the People’s Bank of China completes the final regulatory framework on Bitcoin by this month, the Chinese market will stabilize and Bitcoin price will likely increase as a result.