Chinese Bitcoin exchanges are under increased scrutiny by the Chinese government. Huobi, one of the major Chinese cryptocurrency exchange platforms, has reactivate margin trading. However, the limit is a lot smaller than it used to be. As of right now, traders will hit a margin trading limit at 100,000 CNY, instead of 10 million CNY. It is unclear if this is a result of the scrutiny by the PBOC, but all signs point in that direction.

Less Risk While Margin Trading Is A Good Thing

Speculators and most Bitcoin traders do not touch the cryptocurrency directly. That is only natural, as it is harder to influence markets when dealing with large amounts of Bitcoin. Buying or selling significant quantities of cryptocurrency will alert others as to what may be coming.

Huobi, along with virtually every other major Bitcoin exchange, introduced margin trading quite some time ago. Up until a few days ago, Chinese users could enjoy this feature with a limit of up to 10 million CNY. Once news broke about the PBOC taking a closer look at Chinese Bitcoin exchanges, the feature was disabled for a brief period.

Earlier today, it was confirmed Huobi enabled margin trading once again, albeit with a significant drawback. Limits for margin trading have been lowered to 100,000 CNY. Albeit this is still a US$14,400 limit at the current exchange rate, it will take some time for speculators to adjust to this new rule. This also appears to be the first step by Huobi to ensure they adhere to the “new” PBOC guidelines for Bitcoin exchanges.

Many people in the Bitcoin community see this change a positive development for Bitcoin in general. A lot of margin traders took a significant hit due to the falling price this week, and protecting these people from major financial harm should be the top priority at all times. Huobi has now introduced the necessary limits to ensure speculators and traders do not lose all of their assets with one trade going awry.

Do keep in mind this new limit will not prevent Chinese Bitcoin holders from liquidating their assets if they want to. The majority of Bitcoin-based trades originates from China, and every single buy or sell order on Huobi is a direct result of someone exchanging their Bitcoin assets. Margin trading can affect the price outlook, but does not generate “actual” Bitcoin volume on an exchange.

This new limit is an excellent example of how potential regulatory changes can be positive for Bitcoin as well. In most cases, regulation has only hindered Bitcoin, yet the PBOC seems to be doing some things right so far. This move may also reduce Bitcoin volatility in the future, something that is direly needed in these times of rather extreme volatility.

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