Beijing , China ( CNN ) -- When 23-year-old magazine editor Liu Xinda looked to make his first investment in 2012 , he considered the stock market . Many Chinese investors have jumped on the skyrocketing property market , but it was too rich for Liu 's blood . Instead he decided to invest in bitcoin . `` I believed in bitcoin as a more secure way to store the value than renminbi , '' Liu said , referring to China 's currency . `` I trusted in its mechanisms . '' Liu 's trust paid off -- he purchased bitcoin when it was trading at 60 yuan ( U.S. $ 9.85 ) on the Chinese market and sold when it was trading at 700 yuan ( $ 115 ) in June . Last week , bitcoin was trading at 7,000 yuan ( $ 1,149 ) . With bitcoin now reaching prices equivalent to an ounce of gold , more investors are turning toward the digital currency for a return on investment . And Chinese investors seeking similar investment success like Liu are feeding the bitcoin frenzy . More than a third of the world 's bitcoin transactions now flow through China 's largest bitcoin trading website BTC China , according to bitcoin data websites . China has surpassed Japan 's Mt.Gox and Europe 's BitStamp , reaching 100,000 Bitcoins in daily trading volumes , or more than 400 million yuan ( U.S. $ 65.7 million ) in daily transactions . Infographic : What is bitcoin ? `` We think it 's because bitcoin presents itself as a new asset class , albeit digital in nature . And given China is a country with strong practice of savings , '' Bobby Lee , CEO and co-founder of BTC China , told CNN . `` It is quite understandable that the Chinese would want to explore bitcoins as yet another potential asset class for investing some of their savings . '' In recent years China has been pushing to internationalize the yuan , adding more value to the once tightly controlled currency on international markets . But despite the changes , controls mean individuals still find it difficult to invest in assets outside China . As a result , more Chinese are looking to invest in alternative assets like bitcoin . Trading in the digital currency has been extremely volatile . Early in November the currency rose to what was then an all-time high of $ 900 earlier , only to fall back to $ 500 in the span of 28 hours . By last Friday , it was trading as high as $ 1,242 . Bitcoin worth almost as much as gold . `` Chinese interest could play a huge role in turning bitcoin into the first trillion dollar non-fiat currency , '' Stan Stalnaker -- founding director of Hub Culture and the Ven , an asset-backed Internet reserve currency -- recently wrote in a CNNMoney opinion piece . `` Ironically , it is the United States , the 'free market ' financial heavyweight in the world , that finds itself moving slowly to figure out how to adopt bitcoin , '' he wrote . `` Meanwhile , China is proving to be a leading player in this 21st century currency . '' However , digital currencies are not officially recognized as legitimate in China . In 2009 , the government restricted the use of QQ coin , a popular virtual currency created by tech tycoon Tencent , to only virtual products . Now Bitcoin faces a similar move . China 's central bank warned late on Thursday that Bitcoin carries substantial risks and issued new rules to prohibit financial institutions from dealing in the digital currency . Ron Paul : Bitcoin could 'destroy the dollar ' Under the new regulation , financial institutions in China are banned from trading , underwriting or offering insurance in bitcoin . In addition , websites in China that provide trading services are required to report investors ' identities to regulators and take steps to prohibit money laundering . Following the central bank 's announcement , the bitcoin price on the Chinese market shrunk by more than 20 % and is still in decline . While the central bank did not outlaw or prohibit individuals from owning bitcoin , the guidelines specify that it is not to be considered a currency . With his past gains , Liu is happy to besitting out the current bitcoin boom and bust . `` The ongoing trend is nothing more than a hype to attract geeks , '' he said . `` It 's still very hard to spend . And I 'm not investing more in bitcoin until I can use it to buy things from Taobao and Amazon . '' `` These are speculators that do n't have faith in Bitcoin 's value . They 'll bailout from the market immediately after they suffer a deficit , '' he added .
NEW : Chinese authorities crack down on smuggling . Analysts : Bitcoin trading is being fueled by voracious Chinese investors . A majority of China 's transactions now occur through China 's largest online trading website .