Chinese Traders Turn to Bitcoin as Local Stock Market Crashes

As China’s stock market faces a downturn, a new investment trend is emerging among its traders. Bitcoin and other cryptocurrencies are gaining popularity as alternative investment havens, offering stability during economic uncertainty.

This shift comes despite the nation’s stringent ban on cryptocurrency trading and mining, showcasing the resilience and adaptability of Chinese investors.

Evading China’s Crypto Ban

Dylan Run, a finance sector executive based in Shanghai, epitomizes this trend. Early in 2023, as the Chinese economy showed signs of distress, Run began diversifying his cryptocurrency investments. This move was despite the ban on crypto trading and mining in China since 2021.

Run navigated the restrictions using bank cards from small rural commercial banks and engaging in grey-market transactions. His strategy involved capping each purchase at $6,978 to avoid detection. He now holds roughly $141,024 in cryptocurrencies, accounting for half of his investment portfolio.

Compared to China’s faltering stock market, Run’s crypto investments have soared by 45%, prompting him to say, “Bitcoin is a safe haven, like gold.”

This shift towards cryptocurrencies is not isolated to Run. Many Chinese investors seek creative avenues to invest in digital assets. Cryptocurrencies are perceived as more stable than the volatile stock and property markets at home.

Indeed, investors like Charlie Wong, a buy-side equity analyst, have turned to platforms like the Hashkey Exchange in Hong Kong to purchase Bitcoin.

“It is hard to find opportunties in traditional fields. Chinese stocks and other assets perform poorly… The economy is undergoing a crucial transition,” Wong said.

Such moves indicate the broader sentiment among Chinese investors seeking alternatives to the struggling domestic markets.

While the mainland bans cryptocurrency, trading platforms like OKX and Binance continue to cater to Chinese clients through over-the-counter channels and other means. Moreover, overseas bank accounts and Hong Kong’s relatively friendlier stance towards digital assets can also help to circumvent restrictions.

Bitcoin Is the Safe Haven

Though operating in a grey area, the underground crypto market in China is thriving. Crypto data platform Chainalysis noted a significant increase in China’s peer-to-peer crypto trade volume, with the country climbing to the 13th spot globally in 2023 from 144th in 2022.

Despite the official ban, the Chinese crypto market witnessed a staggering $86.4 billion transaction volume between July 2022 and June 2023.

“China and Hong Kong also show unique breakdowns in most-used crypto platform types, though these numbers should be taken with a grain of salt given the anecdotal evidence that much crypto activity in both countries takes place through OTCs or through informal, grey market peer-to-peer businesses,” the report read.

Cryptos Received by Country. Source: Chainalysis

The surge in Bitcoin and other cryptocurrencies comes when traditional Chinese investments are underperforming. The crackdown on the property sector and the ongoing economic transition have left traditional investment avenues like stocks and real estate less appealing.

Indeed, a dominant state-owned enterprise sector, opaque governance, regulatory uncertainties, and a weak credit rating system pose significant economic challenges.

“The Chinese economy is making steady progress and will continue to provide strong impetus for the world economy. China is an important engine of global development,” Li Qiang, Premier of the State Council of the People’s Republic of China, said.

Still, the current conditions have precipitated the stock market crash and raised concerns about the future of China’s economic environment. Meanwhile, Bitcoin’s 50% leap since mid-October further underscores its attractiveness as an investment option. Cryptocurrencies are emerging as a viable alternative, offering a semblance of stability and growth potential amidst the turbulence of the Chinese economy.

Read more: Bitcoin Price Prediction 2024/2025/2030

The rise in 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.