As the biggest Chinese exchanges announce the implementation of transaction fees, Bitcoin, once again, shows off its inherent capacity to quickly adjust to the ever-changing environment, and to not only recover from adversity but to also get stronger.
The latest shock resulting from the imposition of transaction fees by Chinese exchanges caused bitcoin trading volumes to plunge dramatically on January 24, 2017. Now, as bitcoin’s value springs back, puncturing the USD 900 resistance level, trading migrates to non-fee-charging exchanges, and traders renew their optimism about the cryptocurrency.
Chinese Exchanges Start Charging Transaction Fees
Bitvc, a bitcoin exchange registered in Hong Kong, joined Okcoin, Huobi, and BTCC in their decision to charge a 0.2 percent fixed trading fee starting on January 24, 2017.
Most recently, on January 26, CHBTC announced its plans to start charging fees too. However, the rate of the trading fees remains undetermined.
The Chinese exchanges’ announcements of their decision to start charging transaction fees caused bitcoin trading volumes to decline spectacularly.
In this regard, Bloomberg reported, “trading volume has plunged 98 percent compared with the first days of 2017, according to data from bitcoinity.org.”
Curbing Manipulation and Volatility in Bitcoin Trading
Eradicating these market flaws is precisely BTCC’s objective for charging fees. The BTCC announcement states, “To further curb market manipulation and extreme volatility, BTCChina will start charging fees for bitcoin and litecoin trading from 12:00 p.m. (noon) UTC+8 on Tuesday, January 24th.”
In effect, many Bitcoin enthusiasts see benefits resulting from the fees being charged by the Chinese exchanges. For example, Reddit user Blaireau1 believes that trading fees will let us see the true Chinese bitcoin market size.
Moreover, according to Blaireau1, “while China still accounts for a fair share of all bitcoin transactions, the reduced share means that any actions now by the Chinese authorities to close off bitcoin will have a far lower impact than was previously thought. This surely reduces volatility and in the longer run will help Bitcoin achieve greater acceptance.”
Now, the latest indicators show that trading is shifting to exchanges that do not charge transaction fees.
Moreover, other exchanges in the region have been gaining prominence. For instance, as of January 28, 2017, Bitflyer, a Japanese exchange, ranks first in the ‘Bitcoin Exchanges Volume Ranking’, according to data from Coinhills.
Bitcoin, the Sturdy Currency
Once again Bitcoin’s resilience is being tested. The currency has had to confront a litany of obstacles during its nine years of existence, which include Mt Gox, the Silk Road, and other scandals.
Moreover, let’s not forget that in 2013, China’s central bank banned financial institutions from performing transactions with bitcoins. This decision caused the cryptocurrency to crash over 20 percent to below $1,000 USD.
Now, the charging of transactions fees by major Chinese exchanges is just the latest episode. The good news is that Bitcoin has always bounced back from any difficulties stronger and reinvigorated. Traders will diversify exchanges and re-adapt to the new ecosystem. Most importantly, the bitcoin market will become more transparent, more stable, less speculative, and better supported by more factual trading volume data.
Traders like Bobby Lee, CEO of BTCC, remain optimistic. Lee said in his Lunar New Year message, “BTCC was successful in 2016. We are working hard to reach greater success in 2017.”
Imagines courtesy of Shutterstock and BTCC.