In a declining stock market, Chinese investors are increasingly turning to Bitcoin and other cryptocurrencies. Despite China’s ban on cryptocurrency trading and mining, traders are finding creative ways to invest in digital assets. A report highlights the increase in the volume of cryptocurrency trading between individuals in China, indicating the existence of a thriving underground market.
As the Chinese stock market faces a recession, a new investment trend is emerging among its traders. Bitcoin and other cryptocurrencies are gaining popularity as alternative investment havens that offer stability during economic uncertainty.
This change comes despite the country’s strict ban on cryptocurrency trading and mining, demonstrating the resilience and adaptability of Chinese investors.
Evading China’s Cryptocurrency Ban
Dylan Run, a Shanghai-based financial industry executive, epitomizes this trend. In early 2023, when the Chinese economy was showing signs of crisis, Run began to diversify its cryptocurrency investments. This move came despite the ban on cryptocurrency trading and mining in China since 2021.
Run got around the restrictions by using bank cards from small rural commercial banks and conducting gray market transactions. His strategy was to limit each purchase to $6,978 to avoid detection. He now has approximately $141,024 in cryptocurrency, which represents half of his investment portfolio.
Compared to the faltering Chinese stock market, Run’s cryptocurrency investments have soared 45%, leading him to claim: “Bitcoin is a safe haven, like gold.”
This turn to cryptocurrencies is not unique to Run. Many Chinese investors are looking for creative ways to invest in digital assets. Cryptocurrencies are perceived as more stable than their country’s volatile stock and real estate markets.
In fact, investors like Charlie Wong, a buy-side analyst, have turned to platforms like the Hashkey exchange in Hong Kong to buy Bitcoin.
“It is difficult to find opportunities in traditional sectors. “Chinese stocks and other assets are performing poorly… The economy is going through a crucial transition,” says Wong.
These moves indicate widespread sentiment among Chinese investors seeking alternatives to struggling domestic markets.
Although mainland China bans cryptocurrencies, trading platforms such as OKX and Binance continue to serve Chinese clients through over-the-counter channels and other means. Additionally, offshore bank accounts and Hong Kong’s relatively more favorable stance toward digital assets may also help circumvent restrictions.
China: Bitcoin is the Safe Haven
Although operating in a gray area, China’s underground cryptocurrency market is thriving. Cryptocurrency data platform Chainalysis noted a significant increase in China’s peer-to-peer cryptocurrency trading volume, with the country climbing to 13th place globally in 2023 from 144th place in 2022.
Despite the official ban, the Chinese cryptocurrency market witnessed a staggering transaction volume of $86.4 billion between July 2022 and June 2023.
“China and Hong Kong also show unique breakdowns in the types of most used cryptocurrency platforms, although these figures should be taken with caution given anecdotal evidence that much of the cryptocurrency activity in both countries takes place over OTC. or through informal peer-to-peer gray market businesses,” the report reads.
The rise of Bitcoin and other cryptocurrencies comes as traditional Chinese investments are underperforming. The real estate crackdown and the ongoing economic transition have made traditional investment avenues such as stocks and real estate less attractive.
Cryptocurrencies are emerging as an alternative, offering a semblance of stable growth amid the turbulence of the Chinese economy. The rise of cryptocurrency investments by Chinese traders is a telling sign of the times, reflecting a strategic shift in response to a changing economic and regulatory environment.
By Audy Castaneda
