Why Is China A World Leader In Bitcoin? - From The CoinFront

Why China is the World Leader in Bitcoin

This is the second in a series of articles on Bitcoin and China made possible with the help of Huobi staff in Beijing.

While the development of the Internet in China lagged behind the US and Canada (only recently have Alibaba, Tencent, and Baidu reached the level of Google, Facebook, and Twitter), the Chinese Bitcoin industry has not only kept up but arguably leads the pack.

Only four years after the first Bitcoin exchange (MtGox) went online, Chinese companies are already at the forefront of the industry with an increasingly sophisticated Bitcoin ecosystem.

And with Russia contemplating a Bitcoin ban, China is even better placed to lead the world in digital currency development.

China Pulls Ahead

Last month for the first time the Chinese yuan pulled well ahead of the US dollar, representing fully 70% of all Bitcoin traded globally in August.

According to the Bitcoin stats website Bitcoin Average, the Chinese yuan representing 47% of Bitcoin holdings.

As the International Business Times noted recently: “China’s impact on bitcoin and its rates have been growing steadily, as the country hosts some of the biggest Bitcoin exchanges and large-scale mining operations.”

China is Key to Bitcoin Everywhere

The 2013 Bitcoin roller coaster in China continued into 2014 affecting world markets in Bitcoin. Because China is home to some of the biggest exchanges and industrial-scale mining operations in the world, instability in China causes nervous ripples through the global Bitcoin community.

In the first months of 2014, uncertainty continued as rumours circulated about the Peoples Bank Of China bringing in an outright ban on Bitcoin.

By April it seemed that PBOC was standing by its statement from December 2013 clearly separating the country’s Bitcoin businesses from its financial industry, with the PBOC’s governor Zhou Xiaochuan saying banning Bitcoin was “out of the question”

Chinese are Great Savers

A recent column in Canada’s Globe and Mail chastised Canadians for being poor financial planners and for having a savings rate of only 4%:

“Chinese people make a fraction of what we do and save 30 or 40 per cent of it.”

Recent studies show China’s savings rate is as high as 50% (compared to 20% internationally), which means there’s a lot of money sloshing around needing to be invested. Bitcoin may seem like an attractive option for at least some of those savings.

China’s Economy is in the Right Place for Bitcoin

Recent economic data show the Chinese economy slowing down despite assurances from Premier Li Keqiang that growth is reasonable and steady.

A series of recent indicators, including industrial output, property, investment and retail, released on the same day, all point to slower economic growth. And it is generally acknowledged that the real estate market bubble could burst at any time.

Some economists are predicting a turnaround soon based on the government’s financial reforms including the establishment of private banks and improvements to the capital market system.

This kind of economic climate may be fertile ground for increased Bitcoin trading as a hedge against further uncertainty. And Huobi is in a position to take advantage of that.

Going Forward

Huobi has until recently been focused on the China market, but now is undertaking an aggressive strategy of international expansion and vertical integration.

In June, Huobi launched a dedicated Bitcoin derivatives trading platform BitVC, which is targeted toward the international market. In a short time, BitVC has already achieved about 25% of the market share of its primary competitor in Bitcoin margin trading (Bitfinex) and it is still growing rapidly.

Huobi has also acquired a Bitcoin wallet, Quickwallet, becoming the first exchange in the world to do so. This is just the beginning of a strategy to diversify throughout the Bitcoin ecosystem, encompassing the entire product chain.

Although the Bitcoin world has been relatively quiet in recent months, Huobi spokesperson Robert Kuhne has faith in its potential. “There is tremendous energy bubbling beneath the surface,” he told The CoinFront. “And while many people believe that Bitcoin is dead in China, that could not be further from the truth.”

Having fallen behind in the development of the Internet, why would China now lead the world in digital currency technologies?

Why Is China A World Leader In Bitcoin?