Crazy impact on historical highs, there are three major doubts behind the surge in Bitcoin

Due to the astonishing increase, Bitcoin has once again become a hot topic for investors. On January 2, according to the digital currency trading platform Huobi, the price reached 7,379.5 yuan per coin, which is only 620.5 points away from the historical highest price of 8,000 points in November 2013. In 2016, the cumulative increase of Bitcoin reached 189%. Behind the surge, three doubts have attracted much attention: whether the price can break through the previous high of 8,000 points; whether programmatic trading can accelerate the rise of the market; and whether it is feasible to exchange currency through Bitcoin.

Approaching historical highs

As of 19:50 on January 2, 2017, the price of Bitcoin was 7,374 yuan per unit, up 6.1% from the previous trading day. It is worth mentioning that after Bitcoin broke through 5,000 at the end of 2016, it rose unstoppably, closing at 6,788 points on December 31, 2016, up 4,437 points or 189% from the lowest price of 2,351 points at the beginning of last year.

To bystanders, this wave of Bitcoin's rise is amazing, but to veteran Bitcoin player Sun Zeyu, the current price of Bitcoin has not exceeded his expectations. "In 2016, I expected that Bitcoin might reach 8,000 points," said Sun Zeyu.

Sun Zeyu also predicted that the probability of Bitcoin price exceeding 8,000 points in this wave may exceed 80%. "There are many positive factors in this wave of rise, including the instability of the world economy; the rapid development of blockchain; people's re-recognition of Bitcoin, and the mass base is better than before; there is a strong expectation of RMB depreciation, and some people are willing to exchange their assets for Bitcoin. In addition, in this wave of surge, many old Bitcoin players did not get good returns. They shorted through the Bitcoin futures platform, and these closings and stop losses also promoted the rise of Bitcoin.

Xiao Lei, chief researcher of Golden Wallet, also agrees with the view that Bitcoin may break through its previous highs. He said that the domestic market is still speculating on expectations for the RMB exchange rate. In the past two days, the policy side has introduced several policies to strengthen capital control, which has a certain impact on the price of Bitcoin. If the exchange rate fluctuations intensify in January, the price of Bitcoin is likely to break through its historical high.

Huobi COO Zhu Jiawei said that changes in supply and demand affect short-term price changes. If the price of Bitcoin breaks its historical high, it will attract a lot of media and investor attention again. "As a trading platform, we are most concerned about investors' risk control education. As an investment product, the price of Bitcoin cannot always rise unilaterally. Investors who make short-term investments should be cautious." Zhu Jiawei said.

Programmatic trading is difficult to accelerate the rise of the market

Compared with 2013, the structure of Bitcoin transactions has also changed significantly. Previously, it was mainly retail investors who traded, but now institutional investors have accounted for a large proportion. In addition, programmatic trading has also been introduced into the Bitcoin trading market. According to data provided by Huobi.com, programmatic trading currently accounts for between 80% and 90% of the platform's trading volume.

Some analysts believe that this wave of Bitcoin's rise is also assisted by programmatic trading, and some exchanges even have the behavior of brushing orders. In this regard, Sun Zeyu said that the Bitcoin market is a T+0, 7*24 trading mechanism, and the introduction of programmatic trading is a sign of maturity and is more conducive to the development of the market. Trading platforms use robots to brush volume, which does not exist.

Regarding whether it will accelerate the market rise, Xiao Lei said that algorithmic trading accelerates price fluctuations, and if it is during an upward period, it will accelerate the rise.

However, Zhu Jiawei said that since Huobi.com announced that Bitcoin-RMB transactions are free of charge, China's Bitcoin transactions have formed a free transaction industry. The hard cost of high-frequency programmatic transactions is almost zero, and the prices of multiple platforms are not completely consistent, which provides a good external environment for programmatic transactions. Therefore, China's programmatic trading volume is relatively large. Programmatic trading cannot accelerate the rise of the market, because the operators behind programmatic trading also have their own judgments on the market. Whether it is bullish or bearish, the operators will have different strategies. The rise in Bitcoin prices still depends on changes in supply and demand.

It is not feasible to exchange currency through Bitcoin

In addition, as expectations of RMB depreciation intensify, there is currently a voice in the market that perfect currency exchange can be achieved through Bitcoin. How feasible is this?

"The Bitcoin market is not a conventional and feasible channel for currency exchange. The actual operation of currency exchange is very complicated. Many people do not understand Bitcoin and have heard a lot about it." Sun Zeyu said that at present, there are two main channels for currency exchange. One is to buy Bitcoin through domestic Bitcoin trading platforms and then sell Bitcoin through foreign trading platforms. However, there is a problem with this method of currency exchange. Domestic and foreign transactions require real-name authentication, and foreign transactions also require real addresses, water and electricity bills and other information. As a Chinese citizen, it is very difficult to operate through your own account, and foreign platforms will not pass the registration and authentication, and it is impossible to withdraw US dollars. In addition, there are transaction fees in foreign trading venues, and the channel of Bitcoin exchange cannot actually exchange many US dollars every day.

Another way is to exchange currency through offline over-the-counter transactions. If an over-the-counter investor has US dollars and is in great need of Bitcoin, he can exchange currency in this way. However, this method not only involves trust issues, but it is also difficult to find people to exchange currency.

Xiao Lei said that Bitcoin itself needs to be purchased with RMB, and an account is also required to cash it out overseas. At the same time, it is still subject to capital account supervision. It is difficult to transfer assets or launder money using Bitcoin. Although Bitcoin itself is easy to transfer, investors ultimately bind transactions with their own cash accounts, making it easier to check the status of funds.

"More importantly, currency exchangers cannot solve the price difference between the domestic and foreign markets of Bitcoin. Judging from the current data of Huobi and the foreign market, the price difference has reached 5 or 6 percentage points, which is very expensive. Economic interests determine the operation mode, and no one is willing to do this." Zhu Jiawei said.