Executive Brief
Western society has been conditioned to think the world begins and ends with their desires and aspirations. Take Bitcoin for example. Bitcoin seems to have begun its life as an American ideal, with virtually 100% of it’s mining and ownership residing in North America. Nowadays, the digital currency has changed, becoming truly global in nature. And when an American sees Bitcoin price take off, the reason is usually not domestic, but international in origin. China has made some moves, and the Chinese investor has fired back, causing Bitcoin value to swell at the end of 2015.
Read the full story below.
Reminds one of “The Fed” and how they influence the markets
America’s Federal Reserve, the private corporation that creates the debt bubble that is the largest sovereign economy on Earth, has been influencing the mainstream economic, or legacy market, for decades. Fed chairmen can sneeze and disrupt the world for two weeks. This may not be the goal of the Chinese government, but the effect seems to work similarly. Reports show that China is looking to manipulate their economy much the same as the central bank in the U.S. does, and this is affecting interest in Bitcoin a great deal.
The world’s largest Bitcoin exchanges, all Chinese-based, including OKCoin, Houbi and BTC China, are showing massive volume increases year-to-year. Yes, the market gains Bitcoin can provide fairly quickly are attractive, but that not the main reason. The main reason is the action of the Chinese government and their “People Bank of China”, their version of the Federal Reserve. ZeroHedge has been on top of this story for months, and this is what they’ve found:
“The last few days, as China has once again started devaluing its currency, authorities once again moved to tighten capital outflows - this time through caps on credit card withdrawals - and sure enough, Bitcoin has been soaring recently. Specifically, a nationwide crackdown on illegal UnionPay point-of-sale devices has sparked capital flight (on heavy volume) through the virtual currency.”
China has recently been granted access, in 2016, to the global IMF SDR currency program, recognizing the Chinese Yuan as a global reserve currency, similar to the British Pound, the Japanese Yen, the Euro, and the Dollar as one of the world’s elite fiat currencies. Amongst other domestic economic factors, China must improve the Yuan’s liquidity in the long-term to grow its global reach, meaning it has more Yuan in the market. This forces an influx of new currency, devaluing all Yuans on the markets, forcing investors to either lose wealth in the transfer, or cash out and move their capital into gold, real estate in the U.S., or Bitcoin. Thus, you see massive Bitcoin exchange usage, see the chart above, and the Bitcoin price rises accordingly.
This may be only the beginning of Chinese capital controls to try and have it both ways. More Yuan flooding the markets while keeping the consumer wealth within the country’s boundaries. Taking massive amounts of money out of Chinese banking debit cards in Macau has been a common practice for such purposes for years, and the government is looking to crack down. UnionPay is the Visa of China and is seeing that most economic movement for funds is out of the country. This is likely causing the transition more directly to Bitcoin exchanges, and this amount of volume easily influences the global market price. This is the second such event triggered by the Chinese, with a similar market effect happening in October.
So not only is Bitcoin price moving to end 2015, but it is not difficult to forecast 2016 to be an explosive year of upward mobility. The Chinese are in line for further devaluations at least once a quarter for the short-term. Positive press from the mainstream media will follow the price up, creating a spiral effect, and the Bitcoin halving next July will only cause more investment both before and after taking effect.
Where this upward mobility stops, nobody knows. Will there be some bubbles in the future? Sure, but the day’s of losing 90% of its value from a Mt. Gox collapse are over. There are now three major Bitcoin exchanges just in that region, much less globally. Mt. Gox was the clear market leader in Bitcoins held, back in 2013.
If you are looking to buy low and go long with Bitcoin, your time is now. Indications are a sub-$500 USD Bitcoin won’t be around much longer, both now and in the future. Take advantage this holiday season and you’ll have one very merry Christmas.
Images provided by BargainFox and Bloomberg
