The major Chinese bitcoin Exchanges stopped no-fee trading at the threat of crack down by the regulators. No-fee trading, in which no fee was charged to buy or sell bitcoins and all profit of exchanges came from from withdrawal fees, was standard practice on bitcoin exchanges in China for several years. No cost transactions made the bitcoin market attractive to high-frequency trading and lead to excessive volatility. After bitcoin market drew attention of the Chinese authorities, the exchanges took preemptive ‘good will’ action to curb speculation and demonstrate compliance.
Following bitcoin’s rise to near all-time highs at the beginning of this year, the startups have faced new scrutiny from the central bank, which appears to have taken a more active interest in their offerings. News came just days after all three exchanges ended margin trading, and talk soon followed that pricing changes could be forthcoming…
Over-the-counter trader Zhao Dong indicated his belief that the policy shifts will impact liquidity in the markets by making high-frequency trading less appealing, changes that he foresees having affect on other exchange users.
… bitcoin is not yet regulated in China, and that as such, the PBoC is also fairly restrained in how it can oversee the nascent industry. Overall, he compared this to the arrival of a cop on a highway, noting that the natural reaction of drivers is to slow their speed in such a scenario, even when no action is taken on behalf of law enforcement. (Read the full article)
The new bitcoin exchange rules include flat 0.2% fee per transaction. So far the market did not react to the new policy with bitcoin price staying slightly above $900 (see the chart below).