Bitcoin’s comeback is mixed

There will be a sharp rise and a sharp fall. A sharp rise may mean a short-term bubble to a certain extent. The large trading volume in the Chinese market is largely related to the fact that Chinese trading platforms are free of handling fees. Investors have no cost to trade, so some investors may trade several times a day, while foreign countries generally charge higher transaction fees. In addition, most Chinese Bitcoin investors are white-collar workers and technology enthusiasts with a certain risk tolerance, but there are also some speculators.

Recently, Bitcoin players have been enjoying great success. After being dormant for more than a year, Bitcoin revived in late September this year, with prices rising for seven consecutive weeks, the longest continuous rise in two years.

Li Feng (pseudonym) is a tech geek who is quite interested in virtual currency technology. "Recently, Bitcoin has been rising rapidly, and my wallet has also become fatter," Li Feng said.

However, Li Feng also told the reporter of International Financial News: "Bitcoin prices fluctuate violently and carry high risks. Investors who bought Bitcoin at high prices in 2013 are still holding on at high prices. I am more interested in technical things. Making money is accidental. I will stop while I am ahead. I will keep a few coins for fun, but I will not invest all my funds in Bitcoin."

At present, Li Feng has only left about 10,000 yuan in Bitcoin trading. In September and October , Li Feng invested 100,000 yuan and earned more than 50% .

Price surge

After causing a sensation in 2013 , the virtual currency Bitcoin experienced negative events such as hacker attacks in 2014. Governments around the world also began to tighten their regulation of Bitcoin, and Bitcoin fell silent.

However , in September 2015 , Bitcoin trading began to become active again.

OKCoin quotes show that Bitcoin / RMB hit a high of 3,350 on November 4 , and Bitcoin / USD also hit 503.98 on the same day, which was the first time in a year that Bitcoin's USD price broke 500. Prior to this, Bitcoin prices had risen for seven consecutive weeks, the longest continuous rise time interval since November 2013. The price level has risen by more than 120% from the low point in January this year , and has also risen by about 50% from the low point in September .

Although the current price of Bitcoin denominated in RMB is still a long way from its peak price of around 8,000 in 2013 , it is enough to bring Bitcoin back to the forefront.

Why such a huge increase in such a short period of time?

Xu Mingxing, CEO of bitcoin platform OKCoin , said in an interview with the International Financial News: "There are many reasons. First, the total amount of bitcoin is limited, but with the surge in the computing power of the entire network (currently 444.6P ), the cost of obtaining a bitcoin is also getting higher and higher. The scarcity attribute and rising costs will inevitably lead to an increase in the price of bitcoin."

Secondly, he stressed that government agencies are increasingly recognizing Bitcoin. For example, on October 23 , the European Court of Justice officially ruled that Bitcoin and other virtual currencies should be exempt from VAT in Europe, just like traditional currencies. The reason is that according to relevant EU regulations, "currency, bank notes and coins used as legal tender" are not subject to VAT, which makes Bitcoin a solid step towards legalization. The U.S. Commodity Futures Trading Commission also issued a document in September , reasonably defining Bitcoin and other virtual currencies as commodities.

Finally, Xu Mingxing believes that the exploration and breakthroughs in Bitcoin blockchain technology ( Blockchain is a distributed peer-to-peer network without a central control point, using a distributed collective operation method to implement a set of tamper-proof and trustworthy database technology solutions, with the characteristics of decentralized storage, highly transparent information, and not easy to tamper with, etc.) have also promoted the discovery of Bitcoin's value. In the past year, banks and other financial institutions around the world have begun to participate in the research and use of blockchain technology.

Zhang Shousong, founder and CEO of Bitcoin trading site Btctrade, also told the reporter of International Financial News: "Most of the rise and fall of Bitcoin are random. The overall upward trend this year may be related to the lower price in the previous period. In addition, after several years of precipitation, everyone's vision has also shifted from the speculative level to the technical level. This year, many mature market banks and stock exchanges have begun to study blockchain technology."

Positive outlook

Will the dramatic price fluctuations of Bitcoin affect its application?

Although price fluctuations are a sign of immaturity, industry insiders remain confident in the application prospects of Bitcoin.

Xu Mingxing believes: "The currency attribute is only a small part of Bitcoin's function. The price of Bitcoin needs time to settle before it can stabilize. Just like the price of gold, it takes a long time to form a relatively stable price calculation. Bitcoin is a great technological innovation. The most important thing is its distributed decentralization, proof of work and other concepts and blockchain technology, which will become the new Internet infrastructure. Therefore, the price fluctuations of Bitcoin do not have much impact on Bitcoin application development companies like OKCoin. "

This year, OKCoin launched the social finance APP Haoyouqian, focusing on the niche field of acquaintance lending. "Acquaintance lending is a traditional financial project, but we have borrowed the concepts of Bitcoin, such as distributed risk control, which is dispersed to lenders. For example, for contract notarization, we have utilized Bitcoin blockchain technology... Ultimately, we still hope to make a deeper connection between traditional finance and digital currency and realize the real-time exchange of legal currency and digital currency." Xu Mingxing revealed.

Xu Mingxing said: "The company's core business is still the Bitcoin business. Bitcoin is a revolutionary product in the financial industry. The Bitcoin business is currently mainly concentrated in the mining machine industry, including professional chip design, mining machine production and deployment, Bitcoin trading platform, blockchain technology application, and the combination of the Internet of Things and Bitcoin technology. The core of the future business is still the innovation and application of blockchain technology."

Zhang Shousong pointed out that many universities and companies are researching blockchain technology, but it will definitely take a long time for it to be widely used in practice.

Not only in China, thanks to the blockchain technology behind Bitcoin, many internationally renowned financial companies are also changing their attitudes towards Bitcoin.

In January 2015 , the New York Stock Exchange, USAA , BBVA , and former Citigroup CEO Vikram Pandit invested in Bitcoin service provider Coinbase , which was approved to open the first Bitcoin exchange in the United States. A few days later, brothers Cameron and Tyler Winklevoss founded Gemini , "a fully regulated, fully compliant, New York-based Bitcoin exchange," which some have called "the Nasdaq of Bitcoin." In March , Nasdaq announced that it would support Noble Markets , giving traditional investors the tools to trade digital currencies just as they buy and sell stocks. Since then, Goldman Sachs has invested in Bitcoin startup Circle Internet Financial .

Gil Luria, an analyst at U.S. investment bank Wedbush Securities , said that Bitcoin has finally attracted the attention of financial institutions and it is expected that Bitcoin-related applications will be widely adopted in the next 10 years.

The application of Bitcoin is also favored by regulators. Kara Stein, a member of the U.S. Securities and Exchange Commission ( SEC ) , recently pointed out that the applications of blockchain technology currently being explored include clearing and settlement, payment processing, and lending transactions. "We can imagine a world where securities lending, repurchases, and margin trading are all tracked through transparent and public blockchains."

Blockchain is like a "public ledger" that uses a computer program to record all transaction information across the entire network. Stan even speculates that public ledgers may one day serve government regulators, allowing them to better monitor "systemic risks" in financial markets.

Beware of risks

Although Bitcoin has so many application prospects, Kara Stan also warned against the hype surrounding blockchain technology. Stan also reminded that these application ideas are still "in their infancy" and that these technologies will need to be continuously evaluated by regulators, academia, and capital market participants before they can match their exaggerated publicity.

In the Chinese market, the risk of speculation has already emerged. On November 11 , OKCoin's quotation showed that the closing price of Bitcoin / RMB had fallen back to 1981.00 , falling below the 2000 mark.

Zhang Shousong pointed out: "When there is a surge, there will be a plunge. A surge may mean a short-term bubble to a certain extent. The large trading volume in the Chinese market is largely related to the fact that Chinese trading platforms are free of handling fees. Investors have no cost to trade, so some investors may trade several times a day, while foreign countries generally charge higher transaction fees. In addition, most Chinese Bitcoin investors are white-collar workers and technology enthusiasts with a certain risk tolerance, but there are also some speculators."

Li Feng also told reporters: " In 2013 , Bitcoin has already experienced a sharp rise and fall, and investors should learn from it."

On November 19, 2013 , the highest transaction price of Bitcoin against RMB reached 8,000 , an increase of nearly 80 times compared to the beginning of 2013 , but the transaction price soon fell back to 4,383 , and was cut in half in two days.

In December 2013 , due to the serious speculation in Bitcoin, the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued the "Notice on Preventing Bitcoin Risks". The "Notice" requires all financial institutions and payment institutions not to buy and sell Bitcoin, and not to directly or indirectly provide customers with other Bitcoin-related services, including Bitcoin registration, trading, clearing, settlement and other services.

In March 2014 , the central bank once again issued the "Notice on Further Strengthening Bitcoin Risk Prevention Work", requiring all banks and third-party payment institutions to close all trading accounts of more than ten domestic Bitcoin platforms before April 15 .

Regulators are committed to isolating Bitcoin risks outside the financial system, but reporters learned that Bitcoin platforms did stop bank recharges and switched to recharge codes. Later, bank channels were gradually restored, but the recovery time of each platform was different.

In addition to the risk of price volatility, there are other pitfalls in Bitcoin trading.

"In some Bitcoin-related Weibo and forums, an advertisement for ' MMM Social Financial Network' can be seen everywhere," said Li Feng.

The so-called " MMM social financial network" is an organization initiated by Russian Sergey Mavrodi many years ago. The rules of MMM are very simple. New members must buy Bitcoin to join, and as a kind of "mutual assistance", Bitcoin will be distributed to other network members. However, new members can get 30% interest every month, and the organization requires investors to disclose their profits on networks such as YouTube , and members can also get a 10% reward if they recruit new members.

Foreign media pointed out that the economic principles of activities such as MMM are flawed and are almost doomed to collapse. However, given that the transfer of funds involved in this type of pyramid scheme occurs between private individuals based on personal will, MMM operates in a legal gray area in actual operations.

It is worth noting that Mavrodi himself is also notorious in Russia and has been detained many times for defrauding investors.

Domestic Bitcoin companies have distanced themselves from the " MMM Social Finance Network". On October 20 , Bitcoin China issued a statement to sever its relationship with " MMM China" . Bitcoin China CEO Li Qiyuan said, " BTCC has absolutely no affiliation with such scams, and investors must consider verifying any entity promoting any Bitcoin-related investment to ensure its legitimacy."

In addition, police in many places issued warnings on Weibo that the " MMM Social Financial Network" was suspected of being involved in pyramid scheme fraud.