How long will Bitcoin last?

Affected by the blockchain technology boom, halving of supply, Brexit and other factors, Bitcoin has regained its upward momentum. At present, the biggest demand for Bitcoin is trading, but the demand is relatively elastic, and the lack of actual application scenarios for Bitcoin has greatly restricted the development of Bitcoin. Fortunately, the living environment of Bitcoin has been greatly improved, and the relevant legal system is being formed.

In June, Bitcoin became one of the most active assets. According to the OK Coin platform quotation, Bitcoin started to rise rapidly on May 26, and on June 17, Bitcoin hit a new high of 5,185.77 yuan in more than two years. So far, Bitcoin has risen by more than 70%.

After hitting a new high, Bitcoin fluctuated violently. On June 20, Bitcoin began to plummet, falling to a low of 3,525 points, and fell for four consecutive days, with a drop of more than 30%.

However, affected by the black swan event of the UK referendum to leave the EU, Bitcoin regained its upward momentum. On June 24, the day of the UK's withdrawal from the EU, Bitcoin's price soared to 4,458 yuan, a single-day increase of 14.82%. On June 30, Bitcoin closed at 4,451.66 yuan. Based on this calculation, Bitcoin's cumulative increase in June was nearly 50%.

The active performance of Bitcoin is attracting more and more investors. "In the past two months, the number of users registered on the OK Coin platform has increased significantly, and the monthly number of registered users has even reached 10 times that of the same period last year. We are also surprised to see this number." Xu Mingxing, founder of OK Coin, said in an interview with the International Financial News.

The hedging effect is a bit weak

Xiao Lei, a financial columnist and electronic currency researcher, told the International Financial News reporter: "There are three reasons for the increased volatility of Bitcoin prices. First, the attention paid to Bitcoin is further increasing, and the market expectations for Bitcoin driven by blockchain technology still exist. Second, the halving of Bitcoin rewards in July will have a certain impact on future supply, and some speculators use this to hype and create price fluctuations to obtain short-term gains. Finally, the Brexit event has led to the depreciation of the exchange rates of currencies such as the RMB, and some investors hope to buy Bitcoin to avoid the risk of exchange rate fluctuations."

According to a survey by Huobi.com, 13% of the platform's trading users purchase Bitcoin as a safe-haven asset.

In fact, this is not the first time that market funds have used Bitcoin for risk hedging. In April 2013, Cyprus suffered a debt crisis. As a decentralized digital currency, Bitcoin was favored by European risk-averse funds. In just a few days, it soared from more than US$30 to US$265, an increase of 8 times.

Huobi co-founder Du Jun believes that "Brexit is good for Bitcoin. Bitcoin already has a mass base in Europe. In the total global trading volume of Bitcoin, European trading volume accounts for 14% to 15%. After Brexit, Bitcoin has attracted attention. However, the total Bitcoin assets are only about 10 billion US dollars, the volume is small, and the price fluctuates violently. It is not wise to use it as a safe-haven asset."

"It is true that some investors bought Bitcoin during risk events," said Xu Mingxing, founder of OK Coin. "Bitcoin trading is different from traditional investment. Bitcoin's short-term profit or loss is difficult to guarantee, and it fluctuates violently. Whether it can achieve a risk hedging effect depends on the timing of investors' buying and selling. It can only be said that European investors' attention to Bitcoin is increasing during risk events."

July halving reflected in advance

As the financial market turmoil caused by the Brexit referendum gradually subsides, the demand for Bitcoin as a safe haven has gradually weakened.

"It's hard to decide whether to stay or go." Bitcoin player Jiang Ping told reporters: "July is very critical for Bitcoin. The halving of blockchain rewards will affect the supply. I plan to close part of my position and wait for the halving to take effect for the rest."

Zhang Jian, vice president of technology at Huobi.com, pointed out that the halving of blockchain rewards is a major feature of Bitcoin issuance.

As the underlying technology of Bitcoin, blockchain technology is a distributed database and bookkeeping technology that is almost impossible to change. The Bitcoin blockchain is responsible for maintaining the overall operation and security of the blockchain through the Proof of Work mechanism. Miners compete for the right to record the Bitcoin blockchain through random hash operations to prevent fraudulent transactions and avoid "double payments".

Zhang Jian explained: "The Bitcoin blockchain generates a block approximately every 10 minutes, which is mined by miners through their computing power. Each block is equivalent to a page in the blockchain ledger, and miners are equivalent to bookkeepers. After mining a block, the Bitcoin system will automatically reward the miner with Bitcoin, which is the issuance of new coins. After the reward was halved in July, miners can only get 12.5 Bitcoins each time they mine in a block area, while now it is 25 Bitcoins."

Xu Mingxing pointed out: "The total amount of Bitcoin is constant, and the issuance is decreasing. According to the Bitcoin open source software protocol, the Bitcoin block reward will be halved every 210,000 blocks, which means that the issuance or output of Bitcoin will be halved."

According to calculations, July 9 is the window period for Bitcoin production to be halved.

The halving of production will break the previous supply and demand balance in the Bitcoin market, triggering expectations of supply tightening. One of the main reasons for the surge in Bitcoin prices in June was the halving of production.

Xu Mingxing told reporters: "The most direct impact of the halving of Bitcoin production is the stimulation of Bitcoin prices. The last halving caused Bitcoin prices to rise."

Huobi co-founder Du Jun said that the timing of the halving to stimulate the rise in Bitcoin prices is uncertain, sometimes before the halving, sometimes after the halving. At present, the positive news of the halving of Bitcoin production in July has been digested by the market in advance. The market sentiment was high some time ago, and the price of Bitcoin rose rapidly. After exceeding 5,000 points, the market is difficult to sustain.

In addition, industry insiders also pointed out that a halving of production does not correspond to a doubling of prices. "The price of Bitcoin depends on the actual application of Bitcoin, market confidence and the increase in the application areas of blockchain. Production is part of the factor that affects the price, but ultimately it depends on actual application demand." Xu Mingxing pointed out.

Du Jun also said: "The biggest demand for Bitcoin is still trading, but trading demand is too elastic. Whether at home or abroad, Bitcoin has too few actual applications and insufficient application scenarios. The sharp rise and fall of Bitcoin also reflects this weakness of Bitcoin."

There may be a way to increase your confidence

Although the development of Bitcoin demand still faces challenges, the living environment of Bitcoin has improved greatly compared with a few years ago.

On June 29, the 21st meeting of the 12th National People's Congress Standing Committee was held in Beijing. The meeting reviewed for the first time the explanation of the "General Principles of the Civil Law of the People's Republic of China (Draft)" proposed by the Chairman's Meeting of the Standing Committee of the National People's Congress. Among them, there are provisions for new civil rights objects such as network virtual property and data information, which means that network virtual property and data information will officially become rights objects.

Xu Mingxing pointed out: "Although this is not specifically promoted for Bitcoin, it is good for Bitcoin. If Bitcoin can become personal property as online virtual property and be protected by law, it will bring confidence to Bitcoin transactions and investments."

Jiang Ping pointed out that in 2014, when an investor lost his Bitcoin and reported it to the police station, the police did not know what Bitcoin was at that time and said that the Price Bureau had not set a price and would not file a case. The investor could only suffer in silence and the case was left unresolved. But in the second half of 2015, basically all reports of lost coins were quickly filed.

Li Lin, founder of Huobi.com, said that the release of the draft of the General Provisions of Civil Law has shown us the progress of Chinese law. There is not much difference in the implementation level. In China's actual implementation, citizens' Bitcoin has been protected as an asset. Huobi has cooperated with the police and the courts to deal with several cases of Bitcoin loss in recent years. As regulators become more and more familiar with Bitcoin, the process of citizens reporting cases, judicial investigation and evidence collection, and tracing and protecting is becoming smoother.

According to the draft, "If the law stipulates that specific rights or online virtual property are the objects of property rights, they shall be governed by such provisions." Currently, there is no legal provision that clearly defines the nature of Bitcoin. Currently, the only legally binding document in China is the "Notice on Preventing Bitcoin Risks" issued by the five ministries and commissions of the central bank in 2013, which stipulates that the nature of Bitcoin is a virtual commodity. Virtual commodities have not yet become the object of any specific law. Whether they are classified as movable or immovable property in the "Property Law" or intellectual property in the "Intellectual Property Law", there is currently no clear provision. Therefore, before the specific legal provisions stipulating that virtual commodities such as Bitcoin become the object of a certain right are issued, the implementation level should not be much different from before.

In addition, the draft of the General Principles of Civil Law is currently being reviewed by the Standing Committee of the National People's Congress and has not yet been passed. If it is passed, it will not take effect until the prescribed time after it is passed.

Xiao Lei also said that the protection of virtual and digital property is actually a necessity. This is not only a problem for digital currencies such as Bitcoin, but also a problem of whether more online virtual assets can be confirmed and protected. Bitcoin has high security itself and its purpose of birth is to get rid of dependence on policy protection. Bitcoin is actually not too sensitive to such policies and the impact on prices will not be too great.

However, she further pointed out that due to the rapid increase in the previous period, the peak season price was digested in advance, and it is expected to continue to adjust in the short term. Once the negative factors are fully digested, the supply-side shortage will intensify and inventory will be cleared, and demand will warm up. At that time, zinc prices will definitely rise to a new height.