Bitcoin is going crazy! It’s not because of the US election, but because of the Chinese

According to Yahoo Finance, the price of Bitcoin has risen 23% in the past month and is currently close to the peak level of about $765 reached in June 2016. The electronic currency has risen 66% since January this year.

When the author wrote this article, the price of Bitcoin was $728, which means the market value of Bitcoin is close to $12 billion.

What is driving the surge in Bitcoin prices?

You might think this has something to do with the upcoming US presidential election. Indeed, a research report released by Juniper Research in May this year predicted that Bitcoin prices would soar on the eve of the election due to market instability.

Specifically, the report believes that Donald Trump’s election would boost Bitcoin’s price the most: “If Trump is elected as the President of the United States, there is a high probability that world markets will be turbulent. Bitcoin will thrive in such an environment, at least until the impact on major fiat currencies becomes clear.”

Meanwhile, according to leaked emails, Hillary's campaign considered accepting donations in the form of Bitcoin, but John Podesta, Hillary's campaign chairman, was more interested in the electronic currency Ven. In the end, Clinton's team decided not to accept Bitcoin, and Trump's team did not accept Bitcoin either.

Although the time is so close to the election date, the consensus in the Bitcoin community is that the current surge in Bitcoin prices has nothing to do with Clinton or Trump, but is driven by China.

Chinese investors buy Bitcoin

The yuan has fallen 4.3% against the dollar in the past six months, and the depreciation of the yuan is almost always seen as the biggest factor in Bitcoin's price rise. People think that Chinese investors are seeking a safe haven in Bitcoin because it is an asset that has little correlation with major mainstream markets. However, the reality is usually contrary to this view.

The difference is that this time the data supports this view, and the interest does come from China. Nearly 99% of the global Bitcoin trading activities currently take place in the form of RMB.

According to statistics from websites such as bitcoincharts, bitcoinity and coinmarketcap, the total amount of bitcoin transactions in RMB has increased by more than 20% in the past 30 days. If you can browse the fiatleak website that shows the real-time bitcoin purchase situation, you will find that the vast majority of bitcoin transactions are now conducted in RMB.

"Sometimes when everyone says it's because of China, it looks like an excuse, but in this case, the data supports it," said Alex Sonnenberg, chief financial officer of Lawnmower, a provider of electronic currency trading and data applications. Transaction volume on the Lawnmower app in the past two weeks was 40% higher than the two-week average.

Sanaborg added that whenever the price of Bitcoin rises significantly, for whatever reason, the trend tends to continue. "People see the demand and don't want to miss out, and that's when a lot of new people come in and invest. The market is so thin and new, people are looking for news everywhere, so everything they hear has an immediate effect. It can also go the other way, if people see bad news about the price of Bitcoin, the market tends to panic. This is what the new digital currency Ethereum is doing now."

Other digital currencies are declining

Indeed, the price of Ethereum, a new digital currency based on the independent Ethereum blockchain, fell 17% last month after being hit by a hacker attack that reset the network in July. Ethereum is only a year old, but its price has risen 300% to $11 per coin. The recent decline in the digital currency is a good thing for Bitcoin.

“If you look at the ETH community right now, people are still in shock, and the gap between Bitcoin and ETH is sometimes bigger and sometimes smaller,” said Sanberg.

Ripple, another popular digital currency that was launched in 2012 after Bitcoin, also fell 4% last week.

Bitcoin investors excited about SegWit

There’s another factor driving the price of bitcoin: This month’s vote on whether to implement Segregated Witness, one of the solutions to bitcoin’s ongoing block size dispute.

As we all know, Bitcoin is traded on the Bitcoin blockchain, a decentralized, permissionless, peer-to-peer ledger that records every Bitcoin transaction. A large number of transactions are added to the blockchain by "miners," who are paid for their work. Think of these miners as librarians who record dates and borrowers in book cards, or as court clerks who record the history of Bitcoin.

The debate in the bitcoin community over whether to increase the size of each block began last year when the blockchain slowed down due to high transaction activity. The speed of the bitcoin blockchain is crucial because it is often compared to the payment lines of the network of transaction processors such as Visa.

Segregated Witness is a welcome proposal - an update to the bitcoin software that would allow miners to increase the size of their individual blocks without having to upgrade the entire blockchain and make a major overhaul like Ethereum. Think of it like a money truck. Instead of all cars starting to use bigger money boxes, Segregated Witness is more like allowing every driver to start using a few bigger boxes, just in case.

The proposal will go into effect on November 15, when bitcoin miners will be able to signal for each block they are responsible for whether or not they support Segregated Witness. This measure should help more transactions go through faster. A year later, if 95% of blocks say they are happy with it, Segregated Witness will go into full effect on the Bitcoin Core software.

Why does this matter to the price of Bitcoin? Probably not to idle outside speculators, but for Bitcoin insiders, the implementation of SegWit is an exciting milestone that could have a certain impact on the price of Bitcoin.

“So I think SegWit is a major market move,” Sanberg said. “SegWit has been talked about for so long that if there was news that it would be delayed or there were problems, the market would move in the opposite direction, but now it is bringing community demand back to Bitcoin.”

The Chinese yuan may be the main factor driving the rise in Bitcoin prices, but the implementation of Segregated Witness is not entirely unrelated to the general instability in the US market. The presidential election is bound to have a greater impact after it ends, and if Trump wins, Bitcoin is expected to rise. (Double Knife)