Analysis of the real data behind the surge in Bitcoin prices and issues such as currency exchange

Reporter: Lydia

Recently, Bitcoin has been eager to welcome the spring, making Bitcoin investors feel very proud. Some industry insiders analyzed that the current rise has stabilized, which is within the expectations of investors. One of the reasons is that the underlying technology of Bitcoin, blockchain, has been gradually recognized by the government and the public, which has promoted the public to understand the value of Bitcoin more scientifically. However, looking back at the history of Bitcoin's development, there have been many times when it has been cut in half. Does this counterattack mean that it is time to be optimistic? What is the real trading volume? Is this rise just a short-term demand, or is it a general trend? Will Bitcoin cause the country's foreign exchange reserves to flee? This article will help you solve a series of problems caused by this surge.

The price of Bitcoin has risen sharply in recent weeks and on January 5, 2017, it broke through the 2013 high of 8,000 yuan.

Trading volume is incomparable

According to data from domestic exchanges, the trading volumes of OKcoin and Huobi have been rising steadily. OKCoin's 24-hour trading volume on January 5 reached 3.76 million bitcoins (about 30 billion yuan at a unit price of 8,000 yuan). In addition, the trading volumes of Bitcoin China and Huobi also reached 3.7 million and 3.12 million bitcoins, respectively.

Real transaction volume

At the same time, the 24-hour trading volumes of Bitstamp, Coinbase and Bitfinex, which are more influential overseas, are 21,200 bitcoins (about 169 million yuan), 16,700 bitcoins (about 133 million yuan) and 58,300 bitcoins (about 466 million yuan), respectively. It can be seen that the domestic trading volume far exceeds the foreign trading volume. However, it cannot be concluded that 99% of the global trading volume occurs in China. Since these large domestic exchanges do not charge transaction fees, while foreign countries charge fees for each transaction, there are a large number of robots in China that trade frequently. Therefore, the domestic trading volume and foreign trading volume cannot be simply compared. If we exclude those for the purpose of hoarding (considering that only about 16 million bitcoins have been released in total, the daily volume of those who buy and do not move will definitely not be too large), and those who brush or high-frequency trading, the trading volume for the purpose of real trading is probably not much higher than that of overseas.

Conjectures

There are also many rumors in the market that this is due to a large number of fake orders from domestic exchanges, which is believed to create a hot market and thus drive up prices. This conclusion is also one-sided. In fact, domestic exchanges are indeed suspected of creating trading volume by artificially faking orders, especially several large exchanges deliberately inflating trading volume in order not to lag behind others. However, no matter how the trading volume is tampered, unless it is a real investment, it can only create trading depth and it is difficult to significantly increase the price (unless the exchange creates its own RMB and Bitcoin out of thin air, which will cause a huge disaster).

Around 11:00 on January 5, 2016, the Bitcoin price on OKCoin was about 8644 RMB (about 1248 USD at the official exchange rate of 6.927 at that time), and the price on Coinbase was 1132 USD (about 7837 RMB), which shows that the rise was obviously led by the domestic market. We already know that there are a lot of robots moving bricks (taking advantage of price arbitrage between markets), so it can be basically considered that this is the real exchange rate difference between RMB and USD in the current Bitcoin market, that is, 8644/1132=7.63. Obviously, there is a big difference between this exchange rate and the current official exchange rate, and this difference can also be considered as the real cost of moving bricks. Of course, this is just a rough comparison. With more data, we can draw more interesting conclusions, which will not be elaborated in this article.

Is Bitcoin exchange a fantasy?

If we want to convert 10,000 RMB into US dollars through Bitcoin, we can use RMB to buy Bitcoin in domestic exchanges, and then sell Bitcoin after transferring it to overseas exchanges. In this way, it is completely possible to circumvent the domestic limit of 50,000 US dollars per person (in fact, the so-called 50,000 US dollars only refers to personal foreign exchange exchange in banks), and it is completely legal (whether in China or the United States, it is completely legal for individuals to buy and sell Bitcoin). However, due to the exchange rate difference, we will find that this 10,000 RMB will become 1310.61 US dollars, while if it is exchanged through the official exchange rate, it should be 1443.63 US dollars. The loss in the middle is about 9.21%, which is equivalent to a handling fee of about 9.21%. For most people, this cost is not low. In addition, the price fluctuations of Bitcoin must be taken into account. Of course, for professionals, there are many ways to eliminate price fluctuations, but for ordinary people, it may not be easy to master these methods.

Considering that the actual 24-hour trading volume of foreign exchanges is only about RMB 100 million, if any single amount of funds exceeding RMB 10 million enters and is sold out at an overseas exchange instantly, it may cause disturbances to market prices. This is also an important factor that must be considered for large amounts of funds to be exchanged through this channel.

Real-name authentication required

Many people cannot distinguish between bypassing foreign exchange controls and money laundering, which leads to a great misunderstanding. In fact, these are not the same thing. Money laundering refers to the act of disguising and concealing the source and nature of illegal income and the proceeds generated by it through various means to make it legal in form. Therefore, bypassing foreign exchange controls is not a form of money laundering. In fact, it is difficult to launder money with Bitcoin. Currently, the world's major digital currency exchanges related to legal currency (legal currency) strictly implement the KYC policy of the local banking industry. In China, full real-name authentication must be carried out, and video live audits must be conducted. There is no way to conceal the identity of the customer, so it is almost impossible to use Bitcoin to launder RMB and US dollars.

Flows between RMB and USD at home and abroad

In addition, using Bitcoin to complete the exchange between RMB and USD will not cause the loss of domestic foreign exchange. If you buy Bitcoin in China, it is equivalent to the RMB in your hand going to another person, and his Bitcoin going to you. Then you transfer Bitcoin to an overseas exchange, which is equivalent to your Bitcoin going to someone overseas, and his USD going to you. Even if you are willing to bear the 9% cost to break the foreign exchange limit of 50,000 US dollars, from a macro perspective, there is no flow of RMB in China and USD abroad. So there is no question of the impact of using Bitcoin on the flow of RMB and USD at home and abroad.

We have all witnessed Bitcoin’s development from its debut in 2013. We will have to wait and see whether it will truly “return as the king” in 2017!

As a speculative product, Bitcoin has become popular all over the world, but as a new global decentralized currency, it seems that there is still a long way to go.

As American economist Paul Krugman puts it:

"At least for now, buying Bitcoin is still a good investment. But this does not mean that this experiment is successful. The original intention of establishing a monetary system is not to make those who hold the currency rich, but to make transactions convenient and benefit the entire economy. And Bitcoin has not brought us these."