Total output volume may be a useful metric, since people may have used a Bitcoin transaction to move Bitcoin from one exchange to another. But a large amount of Bitcoin can be sent in a single transaction.

https://blockchain.info/charts/output-volume

Another popular metric, since output volume can be pumped up by sending the same coins over and over gain, is Bitcoin Days Destroyed.

https://blockchain.info/charts/bitcoin-days-destroyed-cumula...

http://bitcoin.stackexchange.com/questions/845/what-are-bitc...

Also transactions on the exchanges don't show up in the blockchain.

Bitcoins, like any money, is used to satisfy a reservation demand, that is, a demand for holding money for future use. "Currency" appears only when you find a closely connected group of investors in this money that find it useful to trade right in this money. "Circulation" of money happens as an effect of a bunch of investors finding each other in their daily market cooperation.

Today Bitcoin is in hands of fewer than 0.001% of all people in the world and those people are pretty scattered across the globe. This does not diminish utility as "store of value", but it does not create a lot of trade. Once, say, 10% of Shanghai is holding Bitcoin, you will suddenly see a spike in trade in Bitcoin itself (as it will be cheaper than moving cash or using credit cards).

That's actually an interesting point. It's possible that people on BTC China are not in fact moving their bitcoins out of the exchange and selling them on another exchange to launder money. They're possibly holding bitcoins in their BTC China wallets. Those transactions will not influence the over all bitcoin transaction volume.

Furthermore, per exchange volumes have been insanely high over the past few days. See: http://bitcoincharts.com/markets/

What you basically pointed out points towards the premise of the article being false. It's not money laundering, it's something else.

> Those transactions will not influence the over all bitcoin transaction volume.

Shouldn't there be a "MtGox wallet (say)" -> "chinese wallet" transaction somewhere in the blockchain?

There should be, if they chose to withdraw their bitcoins from Gox. But assuming that the article is right, there would be another transaction that moves the money from their private wallet to bitstamp/another exchange as well.

Basically all there is evidence of right now is that the Chinese are buying tons of bitcoins. No evidence of selling/moving as such.

It's not possible to use Gox for USD withdrawals at the moment so I don't think they'll try that anyway.

Check this out, see BTC are going to China (and other countries) in real time.... it's all buying: http://fiatleak.com/

More and more off-chain transactions are happening as well: moving between accounts on exchanges, or moving between accounts on sites such as Coinbase.