Chinese economy

Bitcoin Exchanges Reveal ‘Real’ USD/CNY Rates, Says Bobby Lee

The occasional price spread between Chinese and other bitcoin exchanges can allow users to gain insight into ‘real’ USD/CNY exchange rates over official ones, BTCC CEO and Bitcoin Foundation Board Member Bobby Lee told

Also read: Fedspeak: What the Federal Reserve Really Thinks About Bitcoin

‘Real’ CNY/USD Rates Revealed

Since the Chinese yuan (aka renminbi or CNY) is a controlled currency, its value is fixed to the USD at around 6.5 and is not freely traded on markets.

There is, as with other countries under currency controls, a thriving black market in currency exchange, particularly for Chinese wanting to convert CNY into US dollars to send overseas. Black market rates tend to offer a truer indication of a fiat currency’s real value.

But what is that rate, which changes daily? Unless you can obtain a quote from a Chinese street money changer directly, it can be hard to find out. Exchanges like Lee’s BTCC may be an indicator.

Sometimes, for brief periods, a bitcoin price spread exists between CNY-based exchanges and those trading in USD or EUR – with the Chinese price usually higher.

The CNY Bitcoin Price Index
The CNY Bitcoin Price Index

“Chinese (CNY) bitcoin prices are in their own market,” said Lee. “There is no flexible, unlimited way to change into or out of the CNY. So arbitrage opportunities are in some sense limited.”

But the divergence in USD and CNY prices, he added, is based on the “official” exchange rate as published by the Chinese government. Those times when the bitcoin price is higher or lower in China, BTC is actually revealing the black market (or “real”) rate.

You see the same phenomenon in Latin America, Lee said, in countries like Argentina. He continued:

By observing the bitcoin price in China, versus the US dollar rate, and you divide it by the so-called official exchange rate, when there’s a fluctuation there you can actually deduce the black market rate.

“For example: let’s say the official rate is 6.5 CNY per US dollar. If you take the (bitcoin exchange) CNY price and divide by 6.5, and it seems to be higher than the price on a USD exchange, that would imply that bitcoin is in shorter supply and people are prepared to pay more CNY for bitcoin than elsewhere,” he added. “And that implies the black market rate is actually higher than 6.5, and the CNY is weaker than its official rate.”

In same cases, bitcoin offers a way for Chinese to move their money out of the country but it isn’t easy. Some people might choose to use bitcoin if other options aren’t available.

“Bitcoin has no limits. You can go in and out all you want. It’s a really fascinating topic,” explained Lee.

Pro traders, Speculators Also Joining In

Bitcoin.com_Bobby Lee
Bobby Lee

BTCC also added a professional trading platform to its list of services last year to serve the pro-market need to hedge positions, speculate on price movements and benefit from arbitrage.

Aimed at ease-of-use, it offers long and short positions, up to 20x leverage, professional trading tools, and charts.

“It’s the first step of a long process,” said Lee. “And while there are a lot of traders on board, many still aren’t aware BTCC offers professional tools.”

Thanks to an “advanced system call” for margin traders, BTCC does not subject its users to “socialized losses,” i.e. when FX exchanges deal with losses incurred by large price movements by forcing all margin traders on the platform to take a haircut.

Should governments be more honest about the value of their fiat currencies? Is Bitcoin really a useful way to make them more accountable?


Images courtesy of BTCC

  • J T

    I still think we don’t understand what we are witnessing (

    “…since we are so dependent on our use of it and so much controlled and motivated by the wish to have more of it or not to lose what we have we may become irrational in thinking about it and fail to be able to reason about it like about a technology, such as a radio, to be used more or less efficiently.”

    “…money itself is a sort of “utility”, using the word in another sense comparable to supplies of water, electric energy or telecommunications. ”

    “I think of the possibility that a good sort of international currency might EVOLVE before the time when an official establishment might occur.”

    “…my personal view is that a practical global money might most favorably evolve through the development first of a few regional currencies of truly good quality. And then the “integration” or “coordination” of those into a global currency would become just a technical problem. (Here I am thinking of a politically neutral form of a technological utility ”

    “…this is what is more significant from an internationally oriented viewpoint, the various currencies would have rates of exchange so that they could be realistically compared in terms of their actual values.”

    “…What I want to suggest is that “the public” or the user, those for whom a medium of exchange functions as a basic utility, may develop pinions that are critical of currencies of lower “value quality”. That is, the public may learn to demand better quality of that which CAN be managed to be of better quality. ”

    “Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based comparisons.”

    “The currencies being compared, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their users and by those who maybe have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened rate of inflationary deprecation in value.”

    “…this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the “great democracies” that they should be better situated to be able to understand whatever ill bet he monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their “savings”.”