The possible ramifications of the recently revealed investigation by the Chinese central bank of bitcoin exchanges are starting to come to light after BTCC, Huobi and OKCoin suddenly stopped offering leveraged trading on margin. Luckily for long term traders and investors, this time the news hasn’t hurt the price so far, with the BTC/USD exchange rate staying around the $800 level.
Talking to us shortly before this publication, Bobby Lee, the CEO of BTCC, told FortuneZ that the importance of this move needs to be taken in context and not be overstated. He explained that halting leveraged trading could just be a temporary action, one of many more possible tweaks to the service to come, as the exchanges are trying to adapt to the demands of the regulators while nothing official has been decided yet. The real importance here, as he sees it, is that the PBOC is actively engaging with BTCC and other bitcoin exchanges and openly shares this with the Chinese public.
As is commonly accepted in other markets, high leveraged trading can cause volatility to greatly increase with sharp price movements fueled by easy credit rocking the market. As such, this move could actually help the bitcoin market settle down, mature and attract less negative attention for the roller-coaster price changes.
And there is another benefit of the halt of leveraged trading at the Chinese exchanges. We might finally find out if there is truth in the claim that they only report such high trading volumes, far higher than the rest of the world combined, because they offer leveraged trading.