Bitcoin is going to soar! Breaking through the 8,000 yuan mark, what is the difference from 2013?

On January 5, the price of Bitcoin broke through the historical high of 8,000 yuan, and the current highest price is 8,725 yuan, setting a new historical record. The current gold price is 1,164 US dollars per ounce, equivalent to 8,019 yuan, and the price of Bitcoin has successfully exceeded the price of gold.

Bitcoin is the best performing investment in 2016, up 260% in one year

As for why there is such a rise in the short term, Huobi's special analyst analyzed that this is the result of changes in the supply and demand of Bitcoin in the short term. Bullish sentiment prevails, so it drives the price of Bitcoin up.

Other analysts believe that multiple factors such as geopolitical instability and increased investment interest among professional investors are also the reasons why Bitcoin prices have been steadily rising in the past few months.

In addition, Huobi COO Zhu Jiawei analyzed: Bitcoin's underlying technology blockchain has been recognized by major banks and financial institutions around the world; in early 2016, the central bank held a digital currency seminar and began to study digital currency and blockchain technology; this year, the overall performance of mainstream investment products in China, including the stock market, real estate market, and gold, was poor; and Bitcoin's second halving in July 2016 and other factors have contributed to market sentiment fluctuations and pushed up Bitcoin prices.

Zhu Jiawei also said that the widespread application of Bitcoin and blockchain technology is also one of the reasons for the rise in Bitcoin prices. Bitcoin can be used as a means of payment in some countries around the world, and Bitcoin blockchain has realized applications such as issuing stocks and document registration. The overall application of blockchain has also started to develop this year. These have driven the overall upward trend of Bitcoin prices from 2016 to the beginning of 2017.

Who is buying Bitcoin? The largest buyers are from China

Interest from places like Venezuela, where the currency has lost much of its value, and India, which recently stopped circulating its largest-denomination bills, has boosted bitcoin’s price.

More broadly, the isolationist tendencies emerging in American and European politics — highlighted by the election of Donald J. Trump — give Bitcoin a new advantage because it can flow between countries with little regulation.

Analysts believe that "the more people expect new obstacles to appear, the more they expect Bitcoin to be valuable for the circulation of money between countries."

However, most of the people who actually buy and sell Bitcoin today come from one country: China. Some analysts say that some Chinese are trying to circumvent capital controls by buying Bitcoin.

However, a large number of transactions on Chinese Bitcoin exchanges are conducted through automatic software. However, as of today, the market price of Chinese exchanges is nearly 700 yuan higher than that of American exchanges, which also shows that stronger demand comes from China.

The importance of speculators suggests that Bitcoin’s value is still driven by expectations about its potential future uses, rather than its current real-world usage, which is often difficult to quantify.

What’s different this time compared to 2013?

The most popular price of Bitcoin in the last round was 8,000 yuan. 8,000 is like a benchmark. This time, Bitcoin has surpassed 8,000 yuan. What is the difference from 2013?

Huobi COO Zhu Jiawei analyzed that this round of Bitcoin's rise above 8,000 yuan is very different from the situation in 2013 when it rose to 8,000 yuan. First of all, the current Bitcoin transaction volume is incomparable to that of the past, which is about 37 times that of the past. When Huobi's highest price was 8,000 yuan in 2013, the weekly transaction volume was 393,000 Bitcoins, and the weekly amplitude reached 103%. The transaction volume is very small and is greatly affected by funds.

"Today, when the price of Bitcoin broke 8,000 yuan again, Huobi's trading volume in the four days after the holiday was 7.35 million Bitcoins, which is expected to double in a week. It is 37 times the trading volume of that year. The price amplitude in the four days after the holiday was 15.95%, which is much more stable than that year." Zhu Jiawei said.

Regarding the bitcoin price breaking through the historical high of 8,000 yuan, Zhu Jiawei believes that users are still relatively calm. According to data, in the 24 hours before the price broke through 8,000 yuan again, the trading volume of bitcoin was almost the same as the previous period, at about 2 million per day, and the trading volume was about 17 billion yuan per day, "because for investors, they have already had psychological expectations."

In fact, after the application of Bitcoin was promoted, the price has been stable. Although Bitcoin rose by 240% from 2016 to 2017, ranking first among many investment products, according to data from Huobi.com, the number of days with a daily increase or decrease of 10% or more in 2016 was less than 5 days. In 2013, the daily increase or decrease was around 10%, indicating that the Bitcoin trading market has become more mature and stable.

Bitcoin's properties are more like gold

Bitcoin's volatile price has led many analysts to believe that it is less like a currency and more like a commodity like gold, whose value comes from scarcity. In the case of Bitcoin, the rules of its network dictate that only 21 million Bitcoins can ever be created.

Thanks to recent price increases, the price of 1 Bitcoin has staggeringly surpassed the price of 1 ounce of gold — which today is worth approximately $1,164.

Many bitcoin businesses want to edit the underlying bitcoin software to change the number of transactions the network can handle each day. However, those proposed changes are opposed by the team of coders responsible for maintaining the underlying bitcoin software. Many bitcoin companies in China side with those coders.

The disagreement caused bitcoin blocks to become unresolved, with some transactions taking days to complete. The slowdown made it difficult to use bitcoin for everyday payments.

However, the security of the original Bitcoin wallet and exchange software has remained solid during the controversy, making it a potential alternative in countries with less secure currencies and financial institutions.

Despite this new demand, the total value of all bitcoins issued so far is about $16 billion, equivalent to the assets of a mid-sized U.S. company and not even enough to sustain the demand of the small number of Indians or Venezuelans who hope to store wealth in the virtual currency.

This once again points out the importance of speculators who are betting on their own judgment that in the near future, people all over the world will use Bitcoin to meet their daily financial needs, and the price of Bitcoin will be much higher.

Analysts believe that "only 10% of Bitcoin is for current use, and more than 90% is related to the expectation of future use."