BitBeat: Bitcoin price breaks through $400 thanks to a rising star

As Bitcoin market transactions soared and people's interest in Bitcoin's underlying technology increased dramatically, Bitcoin prices also soared, surpassing the peak of $400 since November last year for the first time.

The price of Bitcoin surpassed $400 on Tuesday (and far exceeded this figure on most exchanges), and rose 15% in the past 24 hours to a peak of $209, almost double the $209 it dropped to in August. It has been nearly a year since the peak of $400 in November last year. At that time, the price of Bitcoin was in a weak trend, and it had been declining since reaching an all-time high of more than $1,100 in late 2013. Now, Bitcoin has regained its strength and its price has been rising.

The reasons for this development vary, but one thing is clear: Bitcoin is back on the rise — but this time in a different direction.

The news surrounding Bitcoin has been bright lately. Despite the taint of Bitcoin in the public eye, the media hype about the potential of the so-called blockchain, the underlying mechanism of Bitcoin, has generated strong positive reactions. Blythe Masters, formerly an executive director of JP Morgan Chase & Co. and now the head of financial technology startup Digital Asset Holdings, was recently featured on the cover of Bloomberg Markets magazine, and was interviewed in an article titled "Blockchain: The Possibilities." This week, The Economist also mentioned the potential of Bitcoin in its cover story "The Next Big Thing." Microsoft is looking to apply Ethereum-based blockchain technology to its cloud services business. It seems that every bank on Wall Street and in the City has started to set up teams to explore blockchain, and this shift in focus seems to have completely changed people's perception of the technology.

"This is top of mind for all the financial institutions, all the corporates, all the media," said Bobby Cho, head of trading at itBit, a New York-based exchange. "Even though you're reading about blockchain technology, it's also about bitcoin." The interest in blockchain has led to a surge in trading activity, which has also sparked interest among institutional traders who had been sitting on the sidelines, waiting for the bitcoin market to pick up again. "Seeing the price action start to pick up again," Cho said, "these people are thinking, 'Now we can make some money here,' so they start looking for products to trade."

Clearly, trading volume is rising. BTCC, the world's largest bitcoin exchange, saw an average daily trading volume of around 20,000 BTC in early September, and has recently risen to nearly 80,000 BTC. In addition, CEO Li Qiyuan told MoneyBeat that Tuesday's trading volume was close to the exchange's previous daily trading record of 90,000 BTC. Since the bitcoin market is still relatively thin, the increase in trading volume alone can explain part of the price surge. Due to the scarcity of bitcoin, any large purchase will expand into a large frenzy, which can also explain why the price of bitcoin rose to its historical peak of $1,100 in 2013.

Lee denies speculation that China’s new capital controls are driving Chinese to use Bitcoin to circumvent them, saying there are better ways to circumvent capital controls. China has an extensive black market exchange system that is similar to the hawala system in the Muslim world (explained in more detail in “The Crypto Age”), which allows people to effectively circumvent strict capital controls.

In addition, the price of Bitcoin in USD/RMB has also risen by about $10-15. Li Qiyuan said that this reflects the fact that it has actually become more difficult to buy Bitcoin in China given the price controls. Therefore, arbitrage opportunities come in handy, and people will buy Bitcoin with US dollars and then exchange it for RMB, which makes it less likely for traders to exchange RMB through Bitcoin.

Lee also said that bitcoin trading in China is highly speculative, and all the positive reports are encouraging speculators to continue investing, thus driving up the price. "The Chinese are always belligerent," Lee said, "and the bear market has lasted for a year and a half." At this time, blockchain is a rising star, "shining brightly and even illuminating the way forward for the bitcoin industry."

Source: The Wall Street Journal

Translation: BTCC

Original text: bt.cc/mkn5