Industry insiders talk about Bitcoin's price rise

Bitcoin investors around the world are telling the media that the price of Bitcoin hit a new year high earlier this week. At 8:16 UTC on October 31, the price of Bitcoin reached $333.75, the highest level since it fell to less than $200 in January 2015.

In an interview with bitcoin news site CoinDesk, Bobby Lee, CEO of BTCC, a Chinese bitcoin exchange, attributed the recent rise in bitcoin to a number of factors, saying:

“I think one of the reasons for the price increase is the recent increase in Bitcoin investors… and the recent good news in the space, such as Europe not collecting VAT on it and the auction of the Silk Road seized Bitcoins ending.”

“Investors are once again looking at the benefits of Bitcoin as a means of payment and seeing it as a risk-diversified, safe and appreciating digital asset that is not impacted by central bank policy,” he said, adding that BTCC has seen a surge in Bitcoin trading volumes in recent times.

“It has been slowly rising since mid-September,” he noted.

Macroeconomic events

Commentators have been hotly discussing speculative activity taking advantage of bitcoin’s price fluctuations, often attempting to parse price swings through the lens of global macroeconomic events.

According to the Bitcoin Price Index, the price of this electronic currency has been rising steadily since September 21, opening at $230.86 on the 21st and closing at $226.61.

After that day, the price of Bitcoin began to rise continuously. By October 30, it had risen by more than 44% to reach its historical high.

A closer look at CoinDesk’s BPI (price index) shows that the price increase came after the European Court of Justice ruled on October 22 that Bitcoin is not subject to VAT in EU member states.

Furthermore, China’s capital controls also coincided with the peak in Bitcoin prices in late September.

Is China the reason for the growth?

Robert Viglione, a PhD candidate who recently published a study on bitcoin price differences around the world, expressed his thoughts on the recent price increase, telling CoinDesk:

“It’s hard to say for sure what caused the price of an asset to move, but the most convincing explanation right now is that China caused the price rise. Bitcoin is essentially a disaster asset, and as the Chinese government is tightening capital controls to limit capital outflows, the Chinese appear to be shifting their assets to another form of investment: cryptocurrency.”

This is not the first time that government capital controls have affected the value of Bitcoin.

Earlier this year, when the Greek financial crisis broke out, the price of Bitcoin exceeded $300 and continued to rise. As Mr. Li Qiyuan and Mr. Viglione pointed out, China's Bitcoin trading has seen several peaks:

“China’s bitcoin trading volume now accounts for about 10% of the total market, which is a dramatic change considering that it was previously 48 basis points below the global average. The change in China is obvious, and it is difficult to say whether it is the main reason for the recent price increase, but it is a good explanation.”

Mr. Li Qiyuan explained this theory as follows: It should be noted that the trading price of Bitcoin in the Chinese market has increased by 10% compared to the market of US dollar against Bitcoin.

But he also said that foreign exchange controls were also one of the reasons for the recent price increases.

"While everyone has their own theories, I don't think the reason is currency controls or people wanting to send yuan out of the Chinese market," he said. "Rather, the growth in demand for Bitcoin may be due to the need for payment, speculation or long-term holding."

Multiple factors

Harry Yeh, a manager at investment management firm Binary Financial, said there were a number of reasons behind bitcoin's rise, including advances in blockchain technology, but he also said speculation in China could also be driving prices higher.

Tim Enneking, chairman of the Crypto Currency Fund, believes that the recent interest in blockchain technology has waned, while the number of people paying attention to Bitcoin is increasing because people realize that blockchain technology is no longer uncommon.

He also cited other short-term factors including the launch of the Gemini exchange by the Winklevoss twins, the EU’s decision not to impose VAT on bitcoin purchases, and Mastercard’s recent participation in a funding round for bitcoin investment firm Digital Currency Group (DCG).

Source: CoinDesk

By Yessi Bello Perez

Translation: BTCC

Original link: bt.cc/rhj5