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6 Fast Facts You Need To Know About Bitcoin OTC In China

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Bitcoin in China

6 Fast Facts You Need To Know About Bitcoin OTC In China

Last year, Chinese regulators conducted several attempts to limit its economy’s exposure to cryptocurrency, especially Bitcoin. Measures including the ban on initial coin offerings (ICO), the shutdown of local cryptocurrency trading exchanges and bitcoin miners, were introduced to discourage bitcoin mining operations. Despite the crackdown on centralized exchanges, Bitcoin is proven as “hard to kill” in China due to a strong demand and the boom of Bitcoin OTC channels.


Exchange of Bitcoin and fiat currencies act as an important link in the cryptocurrency chain of ecology. This link can be divided into two types: 1) exchange trading and 2) over-the-counter trading (OTC). After the shutdown of local exchanges, the OTC market for cryptocurrency experienced an accelerated growth from about 5 percent at the beginning of September 2017, to about 20 percent a month later. In this blog, we will cover more details of OTC Bitcoin trading in China.


6 Fast Facts You Need To Know About Bitcoin OTC In China


1. What is OTC exchange?


Different from formal exchanges such as New York Stock Exchange, over-the-counter (OTC) markets have never been a physical place. OTC Exchange offers convenient low-fee escrow service and a marketplace to perform currency exchange operations. The escrow service is using automated verification procedures thus providing payment or funds delivery guarantee for both trading parties.


Image about OTC market

Over-the-counter (OTC) is a decentralized market where market participants trade with one another directly.



2. How does Bitcoin OTC exchange works?


All Bitcoin OTC transactions start by finding a counterparty for the trade. After establishing the relationship, the buyer (or the liquidity-seeking party) will communicate the size, time, and an asking price for the deal. The seller will then respond with its own offer price for the trade. When a price is set and the transaction is confirmed, funds will be transferred.


Some Bitcoin OTC platforms in China may also require a KYC (Know Your Customer) due diligence to verify users’ identity and enhance account security.


Image about KYC, identity verification

Large volume OTC trading requires strict KYC verification


Lastly, the buyer will pay for the bitcoins at the purchase price through various methods (e.g. bank transfer), and the seller will send bitcoins to the buyer. (Read more about how OTC negotiations work)


3. Types of Bitcoin OTC


The Bitcoin OTC trading providers can be categorized into 3 groups: online P2P, online B2C, and offline trading.


a. Online P2P trade

Online P2P Trade aims at offering Bitcoin buyers and sellers a platform to exchange information. Similar to the “Taobao” model, both buyers and sellers need to first publish Buy or Sell information on the platform. When the buyer enters the amount of Bitcoin he wishes to buy, the platform will freeze the corresponding amount of Bitcoin from the seller’s balance, followed by the payment through a mutually-agreed payment method. Acting as a middleman, the P2P platform will charge a certain percentage of the fee for each successful trade. Some examples of online P2P websites include LocalBitcoins, Paxful, CoinCola, and BitcoinWorld.


b. Online B2C trade

With the online B2C platform, users can buy or sell Bitcoin directly at a price specified by the platform. After receiving the payment, the platform will release Bitcoin directly to the buyer’s account, or release funds to the seller’s account after receiving Bitcoin.


On the business side (B-side), the major source of bitcoin or funds is from the platform or cooperative partners.


c. Offline trade

Nowadays, buyers and sellers can conduct the Bitcoin trade even without an official trading platform. Through online chat tools and mobile messaging platforms such as WeChat, QQ, Slack, Telegram or face-to-face talk, buyers and sellers can negotiate the bilateral trade.


online chat tools, mobile messaging platforms

Some online chat tools and mobile messaging platforms: WeChat, QQ, Telegram, Slack


4.  Business models for Bitcoin OTC trade


With the growing popularity of online P2P trade in Chinese bitcoin market, different business models under this type of OTC trading have been developed.


a. C2C OTC-specific trading model

Under this model, such platforms operate C2C OTC business only. Examples include OTC789, LocalBitcoins.com, and Coincola.


b. Wallet APP + OTC

With the additional modules as instant messaging, the platform integrates OTC functions into the Bitcoin wallet APP. Examples include Paxful and Bitcoinworld.com.


c. Exchange + OTC

In this model, the platform runs both exchange transactions and BTC/CYN OTC transaction. Some of these platforms have bridged a virtual currency transfer channel between the exchanges and OTC accounts. Examples include itBit, Huobi, and OKCoin.


5. Payment methods for BTC-CNY trading


Although there are different ways to pay for bitcoins, Alipay and bank transfer remain the most popular payment methods among Chinese dealers nowadays. According to China Bitcoin OTC Report in November 2017, 49% of the selling ads chose Alipay as the payment channel, followed by bank transfer, which accounts for 36%. Other payment methods include WeChat, gift cards, cash deposit to bank and Paypal.


Image of Alipay

Alipay remains the most popular payment methods for BTC-CNY trading among Chinese dealers.

6. Advantages of OTC

Trading bitcoin on OTC market enables users to enjoy several advantages over the exchange:


a. Higher flexibility and privacy

OTC requires neither a physical exchange place nor a prescribed membership, while it is subject to less strict control. Users can thus enjoy a higher flexibility and privacy in conducting one-on-one transactions with their counterparties.


Image about privacy

Users can enjoy a higher degree of privacy with OTC.


b. Better capital protection

Compared to exchange trading, OTC trading can better protect traders’ capital from effects of price slippage. Slippage may result when an investor sells a large block of coins on an exchange all at once. When the large sell order decreases, the price on the exchange may fall as it is filled. This implies that the seller can lose a substantial amount of the proceeds by the time the entire order is filled.


With OTC, users can engage in the transaction for the entire amount at a negotiation price. This ensures the stability for large-volume trading through preventing the price slippage.



OTC trading can better protect traders’ capital from price slippage effect.


c. More personalized services

Nowadays, Bitcoin OTC trading platforms offer users more personalized trading support. For instance, Paxful provides guidance to the first-time buyer through an instant live chat. For itBit, premium services are provided to institutions, investors, and active bitcoin traders. All these help to improve user experiences.


What to expect in the future?


[Update] Although the Chinese government banned cryptocurrency exchanges from operating and start restricting OTC trading recently, no definite plan has yet been developed for “coin-to-coin” exchange. Therefore, cryptocurrencies still have their place in China. If you have any questions regarding China marketing, feel free to contact us for further up-to-date information! It’s interesting particular as some of the largest crypto exchanges are chinese, like Fcoin, Huobi, Binance, etc. In fact some of the most influential exchanges are Chinese, just check out this post.




Bitcoin and Its Possible Impacts on Insurance


Many technological strides have been made over the last couple of decades. Advancement in technology is becoming faster and faster. As each year passes by, people discovered technologies to improve work efficiency, communication, and even financial services. Technology has made the world smaller in a good way; we are now able to talk to family and friends from across the globe without spending too much or the waiting too long for a reply. International financial transactions have also become more straightforward and hassle-free. It is because of one of the most influential and ground-breaking inventions in the financial sector, Bitcoin.


Bitcoin is a new type of currency which can be used in financial transactions without the need for a middleman (usually banks). In 2009, this invention has been gaining popularity since then, reaching an all-time high worth $ 17,900 on December 15, 2017.


Bitcoin, China bitcoin, China marketing

Bitcoin is earning its strong presence around the globe.


The latest data as of April 2018 shows that the price index of bitcoin is currently $9,244.32. Although the figure is more or less fluctuated, it is certainly rising vigorously as the hottest trend around the globe. Various types of ICO also evolve in the market.


Benefits of Using Bitcoins & Influence on Insurance


To understand bitcoin’s influence on the insurance industry, you need to know some of the advantages of it:


1. Anonymity


You can use bitcoins to buy merchandise anonymously. In this time and age, where privacy has become a critical factor when you connect to the Internet, being able to transact anonymously presents a very inviting option for many of us.


2. Easy international transactions


Because bitcoin is not tied to any country or is subjected to regulations, global payments and other financial transactions are easier. It is also a lot more affordable than traditional international banking systems where there are still fees and transactions that take time to complete.


3. Cost


Small businesses may prefer bitcoins since there is no credit card fee they need to pay to the bank. Online stores from across the world could also gain more profit as using bitcoin will not charge them currency conversion and additional fees. It is a benefit bitcoin has over other online payment methods like Paypal.


4. Investment


The history of bitcoin price is also a major factor people consider. Because of the recent rise in bitcoin prices, a lot of people have begun thinking about investing in bitcoin as a form of long-term investment.


Bitcoins are stored in a digital wallet which could either be on a cloud or your computer. Digital wallets serve as your bank account which allows you to send or receive bitcoins, pay for bitcoin transactions, and save or store your bitcoins for future use.


Conclusion on Bitcoin


No one can predict how bitcoin can affect world finance and economy in the long run. However, judging its practicality and current popularity, it is likely to stay for a while. Bitcoin may even revolutionize the way that the insurance industry works. Without the need for banks to act as middlemen, insurance claims would be paid out more efficiently and promptly.


There may also come a time when you wouldn’t need to pay for a monthly premium; with the help of GPS technology and bitcoin technology, your vehicle’s movement can be tracked, limiting the times you need to pay. These are just assumptions but very well may be the future with bitcoins.


Any questions regarding China marketing? Don’t hesitate to contact Dragon Social for further up-to-date information!


Guest Article by Hogan Injury

Original Article


china bitcoin, bitcoin


Sharon Shea
Sharon Shea

A Hong Kong gemini with interests in astrology, photography, video editing, food, travel, and surfing all kinds of social media. Currently working on Content Marketing at Dragon Social.

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