Bitcoin continued its unprecedented climb on Wednesday (May 24), setting a new record at $2,409 per crypto-coin. The digital currency has more than doubled in value since the start of the year.
Bitcoin is a virtual currency that can be moved around the world quickly and anonymously with little to no regulation. Blockchain, a financial ledger maintained by a computer network that can track asset movements without a central regulator, is the underlying technology that makes it work.
Demand for crypto-assets has skyrocketed as blockchain startups gain traction and new tokens are created to raise funding to get them off the ground. These blockchain startups are selling tokens for their up-and-coming currencies in “initial coin offerings,” in which the start-ups sell their tokens directly to the public to raise capital without regulatory oversight.
Meanwhile, as DoubleLine Capital CEO Jeffrey Gundlach tweeted on May 23, the Shanghai composite has swung the opposite way, falling nearly 10 percent in the past two months, as bitcoin surged from $1,037.44 on March 22 to today’s record $2,409. In the same time frame, most global stocks are up.
Gundlach’s theory is that, as Chinese asset prices fall in light of the yuan’s weakness, Chinese buyers are searching for safe investments outside the country, which drives them to bitcoin.
But Chinese demand dropped as the People’s Bank of China began investigating local bitcoin exchanges, according to CNBC. China’s share of global bitcoin trade volume has fallen from an 80th percentile share in January to 10 percent or less.
BKCM CEO Brian Kelly attributes more of the demand to Japan and the U.S., as trades made in yen and dollars have been on the rise. Part of that is due to Japan’s acceptance of bitcoin as legal tender. Since local authorities recognized bitcoin as a legal form of pay, around half of bitcoin trade has been conducted in Japanese yen.