The world’s largest bitcoin market saw a steep fall in trading volumes on the day in which exchanges began charging trading fees at a flat 0.2 percent from midday (Beijing time).
In a 1-hour trading period after bitcoin exchanges introduced trading fees, trading volume at BTC China fell over 80%.
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Huobi and OkCoin, the two other exchanges that were investigated and saw discussions held with the People’s Bank of China saw declines of over 90 percent and 80 percent respectively.
The drop in trading volume can be attributed to the lack of automated bitcoin trading, previously making up for a significant majority of the trading activity in the country. With zero transaction costs till today, traders took advantage of arbitrage opportunities across different exchanges.
The trading fees were first announced unanimously by all three exchanges on Sunday. The introduction of trading fees was to “curb market manipulation and extreme volatility” according to BTC China.
Earlier today, BitVC, Huobi’s USD-specific exchange also announced its move to begin charging spot trading fees for cross-currency transactions at the now industry standard 0.2%.
Trading fees were initially discussed last week between the ‘big three’ bitcoin exchanges after formally announcing the halt of margin or leveraged trading to appease PBOC regulators. The flurry of changes come after “on-site checks” were carried out by the PBOC at the three exchanges on January 11.
Initial investigations pointed to “irregularities” in the operative ways of the major bitcoin exchanges. Local reports cited the PBOC claiming that BTCChina had operated beyond the scope of its business in offering loans for trading, a supposed violation of rules that BTCC CEO Bobby Lee contested while stating that “no one has said that margin trading for bitcoin is illegal.” A week earlier, the three major exchanges had already, informally, stopped margin and futures trading for Chinese citizens.
Price hasn’t been impacted drastically since the introduction of trading fees with a bitcoin trading at over 6300 yuan at OkCoin.
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All time references are in Coordinated Universal Time (UTC).
Image from Shutterstock. Charts from Bitcoinity and BitcoinWisdom.