China's Bitcoin Traders Are Losing Confidence in Exchange Prices

The decision by China's bitcoin exchanges to freeze withdrawals is impacting the country's over-the-counter (OTC) markets.

As reported by CoinDesk last week, two of China's 'Big Three' bitcoin exchanges abruptly suspended bitcoin withdrawals in response to new pressures from the People's Bank of China, a move that was followed by similar, though less restrictive, policy updates from exchanges across the country.

But while the price was not significantly impacted, traders are reporting that they have had to shift strategies, as they believe exchanges no longer act as a reliable price indicator.

In conversation with CoinDesk, representatives from major OTC firms indicated that they are now largely using the US dollar price (as listed on British Virgin Islands-based Bitfinex) to determine the price of bitcoin.

Zhou Shouji, operator of OTC trading firm FinTech Blockchain Group, for example, said his firm now uses the USD rate, as did OTC trader Zhao Dong, who went so far as to described China's exchanges as "totally disabled".

"Since you can't withdraw, the price is meaningless if you want to trade bitcoin," Zhao said, telling CoinDesk:

"The price on Chinese exchanges is fake price now."

Traders further indicated that activity is increasingly taking place on peer-to-peer (P2P) exchange platforms including Bitcoinworld and Bitpie, a wallet and P2P service set up by startup Bither.

Those interviewed indicated that they believe such services could become more widely used, especially if further actions are announced by the central bank.

Kong Gao, overseas marketing manager at OTC firm Richfund, described the prevailing sentiment as one of continued uncertainty.

"I'm just waiting to see what will happen next," he told CoinDesk. "I don't think anyone can predict what the PBOC will impose next."

Shredded yuan image via Shutterstock