Right now, we see the Bitcoin (BTC) exchange rate skyrocketing. At the moment, the day to day volatility is some 25 percent – with the price of 1 BTC closing in on USD 550.
This might very well be a temporary fluctuation. But there are telltale signs that we might see the BTC price continue to rise.
One reason is that BTC is becoming increasingly popular with the Chinese. CCN.LA writes…
Started by Arthur Hayes, a former Citigroup trader living in Hong Kong, the goal was to create an exchange where people use cryptocurrency to bet on securities not easily accessible to them in their home markets.
Because China restricts exchanging its yuan for other currencies, citizens find it expensive and difficult to invest in overseas securities. Foreign investors are also restricted in trading China stocks.
Then, we have the fact that BTC mining is to be slowed down. The Dollar Vigilante explains…
On July 18th of this year bitcoin undergoes a major event that only happens every four years called a “halving”.
Bitcoins are developed through the process of mining. Only 21 million bitcoins can be in existence at any one time. The value of mining is regulated in order to maintain this number. To prevent miners from surpassing this limit, the currency is designed to cut the value of mining in half every four years. It is as if the Federal Reserve slashed the amount of money-printing it does by half.
This could have a major impact on the overall value of the currency. If demand for bitcoin continues to grow while the number of coins that can be mined is drastically decreased, the value should naturally surge. That’s just the law of supply and demand.
The Dollar Vigilante also lists these reasons for BTC increasing in value over time:
- Bitcoin and Blockchain are the Future of Money and Banking
- Capital Control Crackdowns, Bank Bail-Ins and Worldwide Taxation Schemes to Drive Bitcoin Growth
- The Coming Debt Jubilee Could Send Bitcoin Easily above $10,000… Maybe $100,000… Maybe More
A bit optimistic, perhaps. But we really should consider what can happen if there is a USD or Euro crisis. (E.g. a debt crisis, a new bank crisis and/or a haircut on bank savings.)
And the fact that BTC is a decentralised currency out of reach of governments control will always give it a role in a free market.
We live in interesting times.