Amid Bitcoin’s recent price increase, Chinese traders are flooding back into crypto trading, and even paying a premium for their coins. This news comes from a two-part tweet posted yesterday by Chinese social media account cnLedger, which reports on crypto and blockchain.
In the tweet, cnLedger notes that Chinese markets have shown “strong buys” in over the counter (OTC) trades, which is “almost the [sic] only way to buy bitcoin with fiat in China.” Traders are paying at an average rate of 7 Chinese Yuan (CNY) to 1 Tether (USDT — a stablecoin tied 1:1 to the US Dollar), which is about 4.5% higher than the prevailing rate of 6.7 CNY to 1 USDT. The tweet also shows price spreads from China-based crypto exchanges Huobi and OKEx showing the 7 CNY to 1 USD rate at which trades are being made.
In the second part of the tweet, cnLedger attempts to explain the premium — after China banned crypto trading in 2017, the easiest way to buy cryptocurrency for Chinese citizens has been to buy stablecoins (like Tether) over the counter, and subsequently trade into a different cryptocurrency on an exchange. So, in order to purchase crypto at all, Chinese traders must first purchase stablecoins, creating a demand that has bumped the price of Tether past its inherent value of $1 USD. In short, Chinese traders are paying 104.5 cents on the dollar in order to enter the crypto market.
However, despite the appetite for crypto in China, the Chiense government continues to crack down on crypto-related activities, with a series of measures ranging from outlawing ICOs to taking action crypto-related “propaganda.”
On the other hand, Chinese authorities have encouraged the development of blockchain technology. Late last month, Beijing approved a list of 197 firms — including giants Tencent, Baidu, and Alibaba — as part of a plan to register companies that employ blockchain.