It's not that big in China, necessarily. The reason people assume it's big is because the large Chinese exchanges offer fee-less trading, whereas the Western exchanges usually charge 0.2% or so. This causes all the traders to move to e.g. BTC China, and their volume to be 50x that of the US exchanges.
Some people interpret this as Chinese people buying bitcoins, but if you look at the order depth of the Chinese exchanges, it's clear that the USD Bitcoin market is much more liquid (by at least an order of magnitude), and the Chinese exchanges may just be used primarily for cheap speculation/day trading.
Personally, I think the Chinese market is insignificant compared to the USD, and that the PBOC shouldn't have any effect on the USD price, so I've been buying call options throughout the crash.
Isn't at least part of the depth of the USD market relative to the yen market because a lot of the Chinese volume is driven by people that (i) ultimately want to obtain USD and (ii) spend their yuan on mining equipment?
> [...] because a lot of the Chinese volume is driven by people that (i) ultimately want to obtain USD and (ii) spend their yuan on mining equipment?
I guess I'm saying that I don't buy this narrative. "Chinese volume" is people from all around the world trading on BTC China. Anyone can open an account there, not just Chinese people.
People are trying to pull their money out of China, and in the process need to exchange Yuan for foreign currencies. China does not like this, because it causes inflation among other things, so it puts restrictions on exchanging Yuan.
Bitcoin is a way around this. If you are Chinese and can afford big clusters of bitcoin miners, you can mine bitcoin and exchange it for people's Yuan at a higher and higher price, driven by demand to pull money out of china.
"People are trying to pull their money out of China"
Meh. This is the classic story that mainstream articles about Bitcoin almost always repeat over and over. However on multiple occasions CEOs of Chinese Bitcoin exchanges have said they don't believe it to be true, based on how their users use their exchanges. In reality the Chinese just appear to like to invest/gamble/make quick returns more than Western markets. That and a combination of other factors (somewhat more lax domestic financial regulations + large market of 1.4 billion people + due to competitive reasons Chinese exchanges offer 0% trading fees + ...) leads to a bigger and more active Bitcoin trading environment in China.
Are the mainstream articles' claims less likely to be true than the statements of CEOs of Chinese Bitcoin exchanges that have pretty strong incentives to talk up the portion of their business that their regulators are less likely to be concerned about?
Your point is legitimate. However, if the Chinese trading volume (buys) was primarily caused by money flowing out of the country, we would see a correspondingly high trading volume overseas (sells). But we don't.
There is a grand total of $2 billion per year, worldwide, to be made in Bitcoin mining. This number will probably only go down.
The Chinese economy is $11 trillion. I don't think Bitcoin mining really shows up on their radar.
Now, Bitcoin trading... that can make a dent. A single block of a few thousand Bitcoins can circulate a hundred times a year and move many billions of value out of a country. It's also far harder to detect than a mining facility.
The entire market cap of Bitcoin ($12 Billion) is less than 0.5% of China's national foreign exchange reserves. This is not significant in anyway towards capital flight.
Because China is full of cash that can't be used. People may have lots gray money but can't use it.
It's not uncommon to see news where normal traffic accident turns into corruption investigation whey police discovers that lorry involved in the accident was full of cash being transferred. It's permissible to have only ~$50,000 in cash in China.
Bitcoin is still small potatoes in China and elsewhere. Hong Kong banks, underground banks (shadow-bank uses checks drawn on overseas accounts) are still the main gateway to launder money offshore. They move hundreds of billions per year.
The really rich people use overseas mortgages. Buy a house in LA, use yuan deposits and other assets on the mainland as collateral.
Government recently imposes new regulation on how much money each individual could exchange from YUAN to Dollar each year(50k usd, to be specific), that explicitly prevents the exchanged currency to be used in investments such as real estate and US stocks.
This might increase the speculation that Yuan will devalue even further this year. Bitcoin is currently harder to regulate and could be use a way to send money oversea, bypassing the 50k quota. But honestly, I don't think there are a lot of them though. Maybe someone just tries to ride the trend.
China has a lot of people which would make it a big market in any environment, but they also have capital controls so BTC is an easy way to get money over the border. This is also one of the reasons why Chinese nationals have been gobbling up foreign real estate.
There should probably be more than one answer to that, but one of then is that Chinese people love to gamble. I believe that's because gambling was not traditionally frowned upon in China like it was in the West.
An enormous portion of Bitcoin that is continually mined comes from China due to cheap electricity, so that + artificially inflated Yuan means a lot of activity.
