Bitcoin surged 70% in July, experts suggest China should include it in regulation

Bitcoin has been rising since July. The reporter noticed from the Bitcoin (China) K-line chart that Bitcoin has regained its upward momentum since July, with the exchange rate against the US dollar increasing by 11% in July and a 70% increase since the lowest point on July 5.

A Bitcoin investor told the reporter of "Daily Economic News" that the main reason for the sharp rise in Bitcoin in July was that a batch of mining machines were waiting to be sold in August.

Yesterday (August 1), Chen Sijin, a senior consultant at the Royal Bank of Canada and one of the few Bitcoin researchers, said in an interview with the Daily Economic News that Bitcoin is used as a speculation tool just like gold, and has experienced sharp rises and falls due to speculation. Due to its highly speculative nature, it is recommended to suspend Bitcoin trading.

Bitcoin surges in July/

Yesterday, the highest price of Bitcoin was $107.75 and the lowest was $105.53. The reporter of "Daily Economic News" noticed from the Bitcoin K-line chart that Bitcoin began to rise after entering July. After hitting the bottom of $65 on July 5, it continued to rise sharply, rising to a high of $111 on July 31, and the increase since the lowest point was as high as 70%.

On April 9 this year, the price of Bitcoin soared to $266, making many virtual currency investors begin to favor investing in Bitcoin. Only one day later, Bitcoin fell to $140. Since then, Bitcoin investors have had to be extra careful.

Although Bitcoin has experienced huge fluctuations, once falling to as low as dozens of dollars, Bitcoin has boosted the mining machine business because it is produced by mining machines. Therefore, it is not ruled out that mining machine investors have raised the value of Bitcoin in order to sell mining machines in large quantities.

Yesterday, a Bitcoin investor told the reporter of the Daily Economic News that the main reason for the sharp rise in Bitcoin in July was that a large number of mining machines would be sold in August. "If the price of Bitcoin does not rise, who will mine? Who will sell the mining machines to?"

Bitcoin was originally mined by miners (computer graphics cards used to produce Bitcoin). As the price of Bitcoin continued to rise, mining machines appeared. Mining machines are more powerful than graphics cards. They are hardware with specially designed circuits and are several times more efficient than miners. The cost of a mining machine can easily be tens of thousands or even hundreds of thousands of yuan. Due to the high cost, few people use them.

The reporter of "Daily Economic News" noticed among the group of Bitcoin experts that mining machines are currently very popular among Bitcoin investors, with prices exceeding tens of thousands of yuan, allowing mining machine investors to make a lot of money.

According to media reports, domestic startup ASICME.COM also announced that it has developed a special computing device equipped with Avalon chips. By running specific programs on this device, it is possible to generate the virtual currency Bitcoin.

New things always attract many followers, and even Ben Horowitz, co-founder of the U.S. venture capital firm Andreessen Horowitz, is very optimistic about Bitcoin. Horowitz believes that Bitcoin is essentially a software, which means that its success or failure will depend more on cultural recognition than its early functional settings.

Speculation should not be underestimated/

"Value determines price and is affected by supply and demand." This theory can explain many economic phenomena. However, the total amount of Bitcoin is limited, and it has experienced large ups and downs in a short period of time, indicating that the value theory has little effect on Bitcoin.

Chen Sijin said in an interview with the "Daily Economic News" that Bitcoin is used as a speculation tool just like gold, mainly because speculative behavior can lead to large ups and downs.

In the view of industry scholars, Bitcoin does not rely on a specific central issuing agency, uses a distributed database throughout the P2P network nodes to record currency transactions, and uses cryptographic design to ensure the security of each link in the currency circulation. The very limited total number is an important reason why it attracts investors, and for this reason it is listed as a virtual currency.

Recently, Xie Ping, deputy general manager of China Investment Corporation, said at the China Internet Finance Forum and the "China P2P Lending Service Industry White Paper 2013" press conference that Internet finance is now developing rapidly, especially P2P, which may become a new force in solving the financing of China's small and medium-sized enterprises. At the same time, online currency is gradually taking shape. Xie Ping called Bitcoin, Q Coin, Facebook Coin, and Amazon Coin typical currencies among virtual currencies.

However, the objective reality of not being constrained by regulatory authorities has also caused concerns among many Bitcoin enthusiasts. Chen Sijin believes that "there is still a big problem at present, that is, the value of Bitcoin is extremely unstable. In the real world, the exchange rate with the US dollar fluctuates greatly, often up to 8% a day. As of November 2012, the highest exchange rate of Bitcoin in history was only 33 US dollars, and in April this year, the exchange rate of Bitcoin soared to 266 US dollars, and then fell rapidly. This huge fluctuation in a short period of time is unbearable for most investors."

China should bring Bitcoin under regulation/

Because the value of Bitcoin depends on how many people and how many goods and services are willing to accept Bitcoin as payment, as the number of people accepting Bitcoin increases, Bitcoin's market transactions will further prosper.

Chen Sijin said, "There are only a few hundred thousand people who own Bitcoin at present. Compared with the 1 billion Internet user base, there is a lot of room for growth, which is also an important reason why most Bitcoin holders are very confident. However, if the number of Bitcoin users decreases, its value is likely to fall, and it may even be worthless."

It is understood that several American financial experts who have been paying close attention to Bitcoin for a long time agree that, just like gold in the past decade, Bitcoin is just another bubble and a worst-case scenario. The popularity of Bitcoin, like the previous surge in gold prices, reflects from another perspective how bad the financial situation in Europe and the United States is and how panicked cash holders are.

However, due to the risks involved in Bitcoin, governments of some countries have begun to intervene and even suspend Bitcoin businesses.

In May, the U.S. Department of Homeland Security issued a ban requiring mobile payment service Dwolla to shut down its support for transfers to Bitcoin trading site Mt.Gox. At the same time, relevant U.S. departments are also investigating virtual currency transactions such as Bitcoin for possible tax evasion.

In this regard, Chen Sijin believes that the main reason why the United States intervenes in Bitcoin is that Bitcoin is difficult to regulate. "The U.S. government's supervision of the financial market is based on the fairness of transactions."

Thailand has become the first country to ban Bitcoin transactions. The Bank of Thailand believes that Bitcoin is still an illegal transaction. Buying and selling Bitcoin, using Bitcoin to buy and sell any goods, and sending and receiving Bitcoin from abroad are all considered illegal and prohibited.

Bitcoin Co. Ltd, a Thai Bitcoin trading company, recently stated on its official website that they have been discussing with government departments in recent months, hoping to provide legal operation guarantees for Bitcoin trading. However, Thailand's foreign exchange management and policy departments voted that Bitcoin spans multiple financial businesses, but there is currently a lack of applicable laws and capital controls in the country. Therefore, the company's Bitcoin business has to be stopped until there is a law to legalize it.

It is reported that China has not yet issued any policy related to Bitcoin. Industry insiders believe that there are many speculators in China and there is a lack of supervision, so virtual currencies such as Bitcoin should be included in the scope of supervision.

Data shows that the United States has 36,700 active Bitcoin "nodes", followed by China with 22,100, nearly double the number of Germany, which ranks third. The so-called "node" refers to an active Bitcoin client, but the actual number of users is far greater than the number of these nodes.

Chen Sijin said that the Bitcoin market is relatively small and easy to inflate, which inevitably leads to a large amount of speculation, and China should also suspend Bitcoin trading.