Why Bitcoin is so popular

In the past 15 days, Bitcoin has been rising fiercely. Unlike the blind market three years ago, this round of rise is more reasonable. The three external factors of optimized regulatory environment, reduced production and increased market risk aversion have attracted much attention to Bitcoin. More importantly, with the popularization and application of blockchain technology, people are full of confidence in the future trend of Bitcoin. Of course, this has also become a "double-edged sword" that affects the development of Bitcoin. Once new technologies or concepts replace blockchain technology, Bitcoin is very likely to be "abandoned" by the market.

If you ask what is the hottest investment recently, it must be the virtual currency Bitcoin.

According to data from Huobi.com, the largest bitcoin trading platform in China, on June 16 , the RMB price of bitcoin was 4,874.93 yuan per bitcoin. In just over half a month since June , the bitcoin price has risen by 36.2% . The fierce market of bitcoin has attracted the attention of all parties in the market.

Market insiders believe that this round of Bitcoin rise is different from the blind speculation in 2013 , and the fundamentals of Bitcoin are about to change.

Bitcoin investor Lin Yao (pseudonym) happily told the reporter of International Financial News: "After the stock market crash in the second half of 2015 , I looked for other investment products and targeted Bitcoin. There was a positive expectation that Bitcoin production would be halved in 2016 , so I simply took a gamble. However, it turned out that this was the wisest investment decision I made in recent years. My initial principal has tripled so far . "

However, Lin Yao said that there are many investors who have made more substantial returns than himself, and some have even made more than 10 times the returns.

The wealth effect of Bitcoin is attracting more and more investors. Huobi co-founder Du Jun revealed to the International Financial News reporter: "We have observed a substantial increase in new registered users and new trading users. Currently, the number of new registered users on Huobi in May has increased by about 10 times compared with April . In the week when the current round of price rise exceeded 4,000 yuan ( from June 12 to the present), the number of new traders on Huobi was 1.5 times the number of new traders in the previous three- day rise period ( three days before May 31 ) . The number of new trading users refers to the number of users who have never traded before."

The continuous influx of funds continues to push up the price of Bitcoin, and market participants lament that Bitcoin's "new spring" is of great significance.

Three external factors caused the currency to soar

Since the price of Bitcoin soared back to the 4,000 yuan mark on June 12 , 2016 , the price of Bitcoin has continued to strengthen.

In fact, this is not the first time that the price of Bitcoin has strengthened. At the end of 2013 , Bitcoin experienced a fierce rise. In November of that year, Bitcoin rose by 473.63% in just one month , and the unit price of Bitcoin also increased from 1,200 yuan to 8,000 yuan.

However, Du Jun pointed out that this round of Bitcoin price increase is very different from the one in 2013. In 2013 , it was irrational for the price to rise 10 times in one month . The development of the Bitcoin industry in 2016 has undergone tremendous changes compared with three years ago. From the perspective of the overall environment, the development of Bitcoin has achieved phased results. In recent years, several major economies in the world have successively allowed Bitcoin to be used as a settlement currency, and legal supervision of Bitcoin exchanges and trading behaviors has become a trend. The U.S. Commodity Futures Trading Commission (CFTC) has recognized Bitcoin as a major trademark and issued a license to the Bitcoin trading platform Coinbase . Luxembourg in Europe also issued a Bitcoin exchange license to the trading platform Bitstamp in March 2016. Japan also proposed to issue Bitcoin operating regulations in March 2016 .

In addition to the deepening understanding and recognition of Bitcoin by the public and regulators, Zhang Shousong, founder and CEO of Bitcoin trading network Btctrade, pointed out in an interview with the International Financial News: "The more direct reason is that Bitcoin production will be halved in July , and if the purchasing demand remains unchanged, the supply will be tight, so the rise in Bitcoin prices is supported by fundamentals. This positive news can at least continue until July ."

According to the Bitcoin open source software protocol, the Bitcoin block reward will be halved every 210,000 blocks. Currently, the 415,000th Bitcoin block has been mined, and there are less than 5,000 blocks left before Bitcoin production is halved .

Du Jun also pointed out that the network has already produced 2/3 of the total 21 million bitcoins , and the output will decrease rapidly, supporting price increases.

Xiao Lei, a well-known financial columnist and researcher of Bitcoin and other electronic currencies, said: "The accelerated rise of Bitcoin this time is partly due to fundamentals, but more of it is the risk aversion demand of many low-cost (falling interest rates) funds. The global Bitcoin price is currently dominated by the Chinese market. The yields of various financial products in the Chinese market have declined, the stock market has not improved much, and investors' expectations of RMB depreciation have increased, causing some funds to seek other markets that can be manipulated in the short term to obtain high returns."

"Among the users we recently visited, 13% purchased Bitcoin as a safe-haven asset. Compared with 2013 , the current price of Bitcoin is not a bubble," said Du Jun.

Blockchain concept adds fuel to the fire

Lin Yao, who has tasted the sweetness of Bitcoin investment, told reporters: "In recent years, well-known financial institutions and central banks of various countries have become more and more interested in blockchain technology. Although we do not have strong financial strength to follow up on blockchain projects, investing in Bitcoin is equivalent to investing in blockchain technology in a roundabout way."

Du Jun said frankly: "The rise of Bitcoin is related to the recognition of blockchain technology, which has created a favorable environment for investor confidence."

Blockchain technology is the underlying technology of Bitcoin and is currently being sought after by global regulators and mainstream financial institutions.

For example, as part of the Nasdaq Financial Framework , Nasdaq announced that it would open its blockchain service project to more than 100 market operators worldwide. The framework is dedicated to providing end-to-end solutions for Nasdaq's global financial infrastructure customers, including traditional exchanges. The People's Bank of China also talked about digital currency and Bitcoin's underlying technology blockchain many times in 2016. Recently, Ping An Group joined the blockchain organization and joined the R3 distributed ledger alliance.

"The imagination space of blockchain technology is much larger than that of Bitcoin. It is another completely transformative possibility. It will change the face of the global economy from the bottom up. At present, the application of blockchain is still in the early stages of exploration and is still in the conceptual stage. It requires several years of development and patience. The central bank has set up a research group and major banks are also conducting discussions. Huobi, as a first-line enterprise in the industry, has established a digital currency and blockchain research center and cooperated with the Internet Finance Laboratory of Tsinghua University's PBC School of Finance. Now, it has begun to try blockchain-based applications with dozens of companies." Du Jun said, "Blockchain is the underlying technology of Bitcoin, and Bitcoin is also the most successful application of blockchain at present. I think it is difficult for Bitcoin to become a global universal currency. Thanks to blockchain technology, compared with other investment products, Bitcoin has many advantages such as digitization, decentralization, and low transaction costs. It may become a financial tool in the future."

However, Xiao Lei believes that "the rise in Bitcoin prices may bring different results. The rise in Bitcoin prices cannot affect the original supply of Bitcoin. More capital will be transferred to the research of blockchain technology, which will drive qualitative changes in online payments and transactions. This will be very helpful in solving many problems such as efficiency and security in the financial market."

Zhang Shousong also has another concern about the relationship between Bitcoin and blockchain technology: "The confidence in Bitcoin investment is based on the favorability of Bitcoin's underlying technology, blockchain technology, that is, it is based on technological innovation. But if there is a newer technological innovation that replaces blockchain technology, then Bitcoin may become worthless."

Risk accumulation requires timely evacuation

The price of Bitcoin has risen by more than 200% from last year's low . Lin Yao told reporters: "It's time to prepare to withdraw. Before the positive impact of the production cut in July is realized, I will sell most of the Bitcoin. I will definitely withdraw the principal and only keep a part of the profit in Bitcoin."

Why are they so cautious? It is because many investors have learned bitter lessons in Bitcoin trading. In 2013 , after setting a historical record of 8,000 yuan per coin, Bitcoin has been falling all the way under the suppression of regulators, and the lowest point has been 1,000 yuan per coin.

"From an investment perspective, digital currencies like Bitcoin are very risky. Compared with traditional stock and bond investments, the Bitcoin trading market is very small and is a niche alternative investment. Individual investors cannot put all their assets in one basket of Bitcoin, but can only allocate a small amount." Zhang Shousong pointed out, "When the positive impact of production cuts is realized in July , many investors may take profits, and the price of Bitcoin will fluctuate at that time."

Du Jun told the reporter of International Finance News: "We have analyzed the users on the platform and found that there are three purposes for users to buy Bitcoin: one is short-term investment, to make a profit through the price difference, which accounts for the vast majority. Among the users who have been revisited recently, more than 80% of the users know that the production of Bitcoin will be halved in July , and there may be large market fluctuations. From the transaction data of newly registered users on Huobi.com, more than 90% of the registered users buy at low prices and sell at high prices to earn the difference, and only 10% of the users have been holding. The second is to be optimistic about the long-term development of Bitcoin. Most of these are early Bitcoin users who have paid attention to Bitcoin in 2012 and 2013 and have held it for a long time. The third is to invest in Bitcoin as a safe-haven asset. Among the active users (who have trading behavior) we have revisited recently, 13% of the users said that they invest in Bitcoin as a safe-haven asset."

Li Lin, founder of Bitcoin trading platform Huobi.com, suggested: "At present, there is no officially regulated Bitcoin exchange in China. From a policy perspective, the investment environment is not particularly mature, and due to the lack of support from banks and other financial institutions, the convenience of Bitcoin investment is poor. However, from the perspective of industry development, China has some relatively mature Bitcoin trading platforms that have been operating for many years. Since Bitcoin is still in its early stages and there are many uncertainties, investing in Bitcoin is a high-risk investment behavior similar to venture capital. It is recommended to take out a small portion of personal and family wealth for asset allocation, and it is not recommended that Bitcoin investment account for too high a proportion of family asset allocation. At the same time, due to the lack of government supervision, Bitcoin investment should choose a relatively long-term operating platform with strong comprehensive strength and relatively formal platform to reduce the credit risk of the trading platform."