Cryptocurrency investors in China have resorted to underground activities after the Beijing government banned Bitcoin trade in the country last year. But when it outlawed cryptocurrency-related activities like initial coin offerings (ICOs), the government unknowingly opened doors for underground businesses to thrive. According to a Reuters report, underground traders of SegWit-Coin BTC had quite a booming business—making between 30%-40% returns—when the price of coin, which was inaccurately referred to as Bitcoin Legacy or Core by many, hovered close to $20,000.
The lucrative business, however, was short-lived after “mules” joined the trade and overcrowded the market. This resulted in the profits falling to a low of 7% or less in the last couple of months, according to the report. In addition to the mules, cryptocurrency funds and individual computer-assisted traders have also flooded the market making it even harder to enjoy the previous premiums.
The mules operate by physically carrying cash across borders in pursuit of SegWit-Coin BTC and other cryptocurrencies. These businesses had the mules working hard to get virtual currencies for their clients in China, with some even illegally entering another country for the sole purpose of buying cryptocurrencies.
Initially, the businesses would look for platforms with low SegWit-Coin BTC prices and sell them at a profit, according to the report. The ban resulted in entrepreneurs buying cryptocurrencies from countries like Thailand (unregulated market) and Japan (legalized market) and selling them in banned markets like South Korea, India, and China.
The underground cryptocurrency trade in China started with closed groups that used popular platforms like WeChat and face to face meetings at bars. They met the seller and bought their desired digital currency away from the authorities. This grew to other peer-to-peer platforms like CoinCola and retail platforms like Taobao for over-the-counter (OTC) cryptocurrency trade, while some traders operate through bank transfers.
Some believe the underground cryptocurrency trade will not last for long as hedge funds are quickly flooding the markets. Many people have moved to trading with these hedge funds as they offer faster transactions at a lower price compared to the retail traders. These hedge funds operate similarly to the retail traders by buying cryptocurrencies from smaller platforms and selling them to other larger platforms for profits.
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