Last year, Chinese investors were at the forefront of cryptocurrency trade and they stayed there for quite some time. At one point, the Chinese exchanges accounted for more than 90% of the daily trade in cryptocurrencies like Bitcoin and Ethereum.
This wasn’t entirely surprising given the massive trade volume of Chinese businesses and exports around the world. The Chinese businesses and individuals have amassed a lot of wealth, most of it held in US dollar reserves and treasury stock backed by the dollar. For a long time, the Chinese investors have been looking for ways to diversify their holdings to a portfolio of gold, Euro and now, cryptocurrencies.
Perhaps some of you remember the sharp rise in the prices of gold during 2012 and 2013. Major financial institutes had attributed the rise in prices was due to Chinese investors, who were converting their dollar holdings into gold.
Chinese Ban on Crypto Exchanges
Crypto experts believe that businesses in China had been diversifying their holdings into cryptocurrency, particularly Bitcoin as they saw it as a viable and secure currency. Given that cryptocurrencies are easily transferable, free from government control, incredibly secure and completely anonymous, they held great interest for the Chinese investors who face strict government control especially when it comes to the Chinese Yuan.
The Chinese authorities cracked down on crypto trading in the country in September 2017. The spokesperson declared that they wanted to bring the crypto markets under some sort of government regulatory control.
While the crypto markets crashed soon after the Chinese ban, they were able to recover somewhat in the next few weeks. Reports suggest one reason may have been due to illegal trading from Chinese investors, who shifted their trade to exchanges operating in Hong Kong.
Two of the major exchanges in China at the time of the ban were Huobi and OKCoin. Their trade volumes plummeted to just 5 percent of where they were before the ban.
Nonetheless, these platforms have found new and ingenuous ways to continue operating, despite government regulations. They are starting to come back strong as both exchanges now have offerings on their ranks that are within the top 10 in the world by trading volume.
Huobi moved from the regular crypto exchange model to an over-the-counter trading which has worked well for the exchange. The exchange launched its own token HT which runs on the Ethereum blockchain. Instead of going with an ICO model, the HT token was given away as free gift for users that purchased service fee packages on Huobi’s platform.
Within 14 days of its launch, the HT was able to generate $300 million from investors, all of which was collected by the exchange in advance. The exchange is even using the new token to take voting from investors on which cryptocurrency assets should be listed on the Huobi exchange.
The company has already collected nearly 9 million HT from more than a hundred thousand users who have cast millions of votes for dozens of cryptocurrencies.
Former top executives for OkCoin, Zhao Changpeng and He YI created the new exchange Binance. The new exchange has grown to a phenomenal level with daily transactions of more than $1 billion on its network.
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