Bitcoin continues marching to new highs this month, despite the rather ominous news this week that one of the major wallet services, Inputs.io, was robbed of over 4,000 BTC, or one million worth of U.S. coin. ConvergEx Group market analyst Nick Colas says that one of the main reasons is the surge in interest in Bitcoin from China.
“The biggest Bitcoin exchange is now in China, displacing Japanese, American and European sources of demand,” wrote Colas in a note to clients published by Business Insider. “That enterprise is called BTC China, and its CEO Bobby Lee hails from Yahoo YHOO +3.08%! and Walmart China. Oh, and he graduated from Stanford with a degree in Computer Science. In short, an apparently pretty clever fellow.”
On Friday morning in Shanghai, a flattered Lee, 38, spoke to me by phone on his way into the office, with the sound of traffic noise sometimes drowning him out. Lee describes himself as a global citizen. Chinese-American, he was born in Africa; his entrepreneurial parents ran a flip-flop factory in the Ivory Coast. He went to New Jersey for boarding school, then Stanford for college. An engineer by training, he worked on social networking before it exploded (at Yahoo! Groups), then moved to China seven years ago to work on the cloud (atEMC EMC +0.34%) and then digital entertainment (at BesTV, a Chinese company) before being poached by Walmart China to be its VP of technology as it launched an e-commerce operation there. When Walmart decided instead to invest in an existing e-commerce site rather than building its own, Lee decided in September 2012 that he wanted to start his own business rather than work for another big company.
“I was introduced to Bitcoin two years ago by my brother, the founder of Litecoin (ed note: a competing cryptocurrency),” says Lee. “I started mining in 2011 and didn’t think too much about it. But when I thought about what I was excited enough about to start a business, it was Bitcoin.”
BTC China was China’s first Bitcoin exchange. It had been around since June 2011, but ” it was just two guys working part-time and a website,” says Lee. It was seeing trading of a few hundred bitcoins per day. Lee approached the creators at the beginning of this year about turning it into a company and making it bigger. He invested his own money, and brought in funders, and they established headquarters in Shanghai; six months later, they have 20 employees in engineering, product design and customer service. At first, it all seemed like a dream come true. In March, trading was a couple thousand BTC per day; in April, when the price surged to $260/USD, it was over 20,000 BTC per day. But then in the summer, it slowed down dramatically, to below 5,000 BTC traded per day.
“ We eliminated trading fees in September,” says Lee. “It was a strategic move to increase trading in China and draw people to our site.”
That’s $339 U.S. (Image via Zeroblock)
Those fees were less than 1% for the buyer and seller, but eliminating them either worked, or correlated with a sudden resurgence in Chinese interest in Bitcoin. Trading took off in October, building into a frenzy this November. This week, BTC China, which is only connected to the Chinese banking system — which means traders are likely only based in China — hit a record high with 60,000 bitcoin, or over $19 million USD, traded in a 24 hour-period. That’s about .5% of the total Bitcoin currently in circulation, and it made BTC China —briefly — the number one exchange in the world, ahead of Japan-based Mt. Gox and Europe-based Bitstamp. Why are people in China suddenly interested in Bitcoin?
“China has been known as a nation of savers, who are always saving for a rainy day,” says Lee. ”Bitcoin is a digital asset, like real estate, gold, or stock. It is just one more option now. With Bitcoin hard-coded to be limited, it’s like a collectible.”
But he also says that Bitcoin businesses are not running into the same regulatory and banking problems businesses are in the U.S. He says Bitcoin is a “gray area” legally in China, but that the government and banks are less afraid of gray area businesses than those in the U.S. are.
“The law has not caught up with technology,” says Lee “I want China to reevaluate its laws so we can classify Bitcoin as something so government can regulate it.”
“We want to build a company that will last 100 years,” continues Lee. “When I went to Stanford I knew Internet was here to stay. And Bitcoin is same. The Internet was hard to use at first. Computers didn’t have browsers in the early 90s. You had to know FTP and Telnet. The AOLs, Googles and Yahoos made the Internet usable. We want to be that, to make Bitcoin more usable.”
Disclosure: Author owns Bitcoin that remain from her week of living on them