A worker holds a sign at the first bitcoin retail store to open in Hong Kong on Feb. 28, 2014. (Photo : Getty Images)
It is estimated that China's bitcoin markets account for about 98 percent of trading in the global bitcoin market but contrary to this, it is lower at about 80 percent, according to an article by coindesk.com.
The exchanges report that China dominates the market with 98 percent of global volume is false, according to the article.
But unlike in other countries, exchanges in China do not charge fees on bitcoin trades but instead earn money by charging withdrawals. As trading volume increases, the fees are also reduced. This encouraged traders to raise the number by buying and selling from themselves at no cost to them.
To determine the true volume of bitcoin traded in China, data from earlier and current periods in bitcoin trade were compared.
Data from the BTCC, China's first bitcoin exchange, were also used. BTCC started with 0.3 percent fees on trade while the second bitcoin exchange, OKCoin, charged the same percentage.
On Sept. 2013, BTCC experimented with zero fees for three months and all the other local exchanges followed.
This resulted in a spike in volume from 17 percent to 100 percent in just six weeks, the report said.
Before the zero fees were introduced, China's exchange volume growth rose at a steady rate of about 4 percent week on week. The growth rate was used to calculate the volume, if the trend would continue.
Another source of data is LocalBitcoins, a marketplace founded in June 2012 for buyers and sellers, which provide the real figure on volume.
LocalBitcoins started tracking global on-exchange volumes in the fourth quarter of 2013. It is also available in countries, which show the ratio between "on the streets" in each market and the volume on the local online exchange.
The data from LocalBitcoin which show the volume in the local market demand, were compared to the estimate exchange volumes.
According to the article, the real Chinese exchange volume was reconstructed using historical estimates from bitcoin's three phases: the volume before the zero fees era, the trading period, and the adoption of LocalBitcoins.
It was estimated that China's real market share was around 85 percent but data from CoinDesk Research also revealed 95 percent, which indicates that China still dominates the bitcoin volume, depending on the week.
The data also showed that exchange volume does not make up much of the global bitcoin trade but it can set the prices. Most of the volume is conducted in exchanges in over-the-counter (OTC) trades, which means the true global traded volume is not shown.
