In a buying spree that began on Friday (May 27) and carried on through the four days since, Chinese investors managed to push the price of bitcoin up by 16 percent. As of the time this story was written, the price of an individual bitcoin was pushing $550.
All in, bitcoin has added $1.2 billion to its market cap, according to data from blockchain.info. Bitcoin is still trading well below its high point of a little over $1,100.
The bitcoin burst comes as Chinese investors are looking for new and more productive asset classes. Similar booms have recently been observed in equities, bonds and commodities trading — all with an accompanying deflation once the roving gang of investors moves on to the next big thing. The recent devaluation of the yuan has also motivated some Chinese consumers to seek bitcoin as a hedge against currency devaluation.
Investors are worried about the decreasing value of the yuan, and “it seems that China is leading a lot of the movement,” noted Zennon Kapron, founder of financial technology consultancy Kapronasia and author of a book on bitcoin.“People are protecting their investments [by converting yuan into bitcoin].”
Bitcoin offers a unique opportunity to those Chinese investors, as strict regulations in their nation otherwise make it hard for Chinese nationals to move money around abroad. This is among the many reasons Beijing has worked to curb trading in bitcoin.
These days, two Chinese exchanges — Huobi and OKCoin — now collectively account for some 92 percent of global trading in bitcoin.
“There’s a lot of hot money in China that has to go somewhere,” says Du Jin, chief marketing officer at Huobi. Huobi has seen a surge of new registrants in the past month, he said.
The price surging in bitcoin is also being pushed by a perceived coming drop in supply. Every four years, the algorithm that spits off bitcoin through "mining" halves the number of bitcoin it releases in an attempt to keep inflation from occurring.