Bitcoin welcomes safe-haven funds, most of which are believed to come from China

According to Nikkei Chinese website, due to the UK's decision to withdraw from the European Union (EU), not only the Japanese yen and the US dollar, but also Bitcoin, a virtual currency on the Internet, is seeing a buying spree. As the euro and the pound plummeted, some of the funds that could not find a way out were believed to have flowed into Bitcoin. Many people believe that the majority of the funds flowing into Bitcoin come from China, which to some extent reflects concerns about the Chinese economy.

According to statistics from CoinDesk, which operates a virtual currency information website, the bitcoin price surged on the morning of June 24 (China time) when news broke that the Brexit camp had an advantage in the UK referendum.

On the 23rd, the price of 1 Bitcoin fell by 20% from the previous day to $553, driven by the expectation of victory for the Remain camp. However, at 2 pm on the 24th, when Brexit was confirmed, it quickly rose by 22% from the previous day's low to $675.

Bitcoin has been buying due to the UK's decision to leave the European Union, based on the view that some of the speculative funds that did not flee from the pound and euro into the yen and dollar will continue to flow into Bitcoin.

Among them, the renminbi has attracted attention. China still strictly restricts foreign exchange transactions, and even if you want to use the renminbi to buy dollars and yen, it is difficult to do so freely. Bitcoin, which has relatively loose restrictions, has become a refuge for speculative funds, and this has happened many times before.

There is a view in the market that "due to the depreciation of the RMB, the use of RMB to buy Bitcoin has increased. This surge may also be related to this factor" (operator of a large exchange in Japan). In addition, there is a view that about 80% of Bitcoin transactions are denominated in RMB.

The previous major fluctuation in Bitcoin prices was during the financial crisis in the Mediterranean country of Cyprus in March 2013. After the government launched a deposit blockade and taxation to restrict withdrawals, wealthy people who kept their money in banks bought Bitcoins. The price, which was only around $40, soared more than twice to $90 in two weeks.

Due to the UK's decision to withdraw from the EU, the price of Bitcoin once rose to nearly US$690, but then fell to around US$650, with violent price fluctuations.

The background is that the Bitcoin market is small. Although there are about 14 million investors participating in the transaction worldwide, the total market value of Bitcoin is only about 10 billion US dollars.

With the global foreign exchange trading volume believed to exceed $5 trillion per day, British pension funds with huge pound assets are unwilling to depreciate the pound and intend to hedge, but the Bitcoin market is too small. In fact, these funds do not seem to have entered the Bitcoin market. Bitcoin has a small market size that exacerbates price fluctuations.