The price difference between Bitcoin on-site and off-site is nearly 1,000 yuan, but traders are still flocking to OTC

Since the Chinese government has stepped up its supervision of major domestic Bitcoin exchanges, Bitcoin trading activities in the Chinese market have begun to shift from on-site trading to over-the-counter trading, among which the most prominent OTC trading market is Localbitcoins.

After the central bank issued new instructions last month, major Bitcoin exchanges have successively introduced new "KYC" (know your customer) measures and suspended Bitcoin withdrawals, which has also led to a significant increase in BTC trading volume in the over-the-counter market.

Localbitcoins sees surge in Bitcoin trading volume in China

Even the censorship weapon “GFW” has not been able to stop Chinese traders from going to Localbitcoins to trade.

According to data from Bitcoin analysis website coin.dance, the RMB trading volume on the Localbitcoins platform was 3600万元in the last week before February 18.

Last week, the total amount of RMB transactions on the platform has surged to nearly 6000万元RMB. The above chart also reflects the factors of rising Bitcoin prices and RMB inflation. However, the surge in Bitcoin prices has not kept investors away from this digital currency. As of early February 2017, the RMB transaction volume on the Localbitcoins website was less than 14 million RMB.

According to Max, community leader of Finnish company localbitcoins, transactions in the Chinese market are mainly conducted using VPNs.

"Our website has been blocked by the Great Firewall," Max wrote on Reddit. "Currently all Google resources are blocked in China. Unless you use a VPN tool, you cannot access our website in mainland China."

Professional OTC trader "Little Potato" revealed to reporters that after the three major domestic exchanges restricted currency withdrawals, his business volume began to surge. Now he is busy with work most of the day, and his rest time has been reduced to 2-3 hours.

"Last month's transaction volume was close to 30 million yuan, and the transaction fees ranged from 1% to 5%. I can transfer the money first to people I know," he said.

The price difference between on-site and off-site is nearly 1,000 yuan

As of press time, the average transaction price of BTC on the three major domestic bitcoin exchanges (OKCoin, Huobi, and Bitcoin China (BTCC)) is about 8,000 yuan. In comparison, the price of the currency on over-the-counter platforms such as Localbitcoins is close to 9,000 yuan.

Along with this phenomenon, the BTC trading volume of major on-site exchanges has been sluggish. An insider revealed to reporters that in addition to some users who turned to the OTC market, many traders chose to trade on overseas exchanges, such as bitfinex, bitflyer, etc.

The BTC price in these USD trading markets where withdrawals are possible is equivalent to about 8,500 yuan. According to an industry insider who wishes to remain anonymous, more traders will turn to the Japanese market after the Japanese policy is implemented in early April.

At present, many traders are waiting for the exchanges on the market to open withdrawals, which may cause a new round of currency price fluctuations.