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BEIJING, CHINA - SEPTEMBER 30: Chinese President Xi Jinping looks on during a ceremony to mark ... More China's tenth Martyrs' Day, a day ahead of the country's National Day, at Tiananmen Square on September 30, 2023 in Beijing, China. (Photo by Ken Ishii-Pool/Getty Images)
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Bitcoin was "banned" in China in 2021 - so how is it that there's still demand for Bitcoin in China these days? And how are these markets for Bitcoin affecting Bitcoin prices?
A thriving "gray area" marketplace for Chinese mainlanders
There is continued demand for Bitcoin from Chinese Mainlanders (Chinese people outside Hong Kong and Macau). To understand this more deeply, you must understand the nature of the bans in the Chinese Bitcoin context.
While Hong Kong offers futures and spot Bitcoin ETFs, mainlanders are forbidden from investing in these instruments - part of a general trend towards an exchange ban and the ban of public CNY-BTC pairings that make it challenging to track precisely how much Bitcoin is transacted.
However, over-the-counter trade ("OTC") allows people to skirt these restrictions. Sometimes, OTC desks and services are more like private banks - and others are collections of merchants willing to take the legal risk of selling Tether and Bitcoin for Yuan.
Chainanalysis has previous relationships with some of the large OTC desks. Through this data, an increase in trading demand for Bitcoin is observed. As Chainanalysis's media team has commented: "OTC services provide over-the-counter sales for people within China and across the region. Although some OTCs operate distinct on-chain infrastructure, many are nested businesses within other larger exchanges, where they can leverage existing infrastructure and liquidity to support the trading activity of their customers.
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