Do You Own bitcoins? Then 2017 for you has started in the best possible way: the value of bitcoin rises around the world, with special attention to China, where it has risen above 3,000 dollars in recent days.
Why has the value of virtual currency increased so much? We are going to analyze the possible causes of this rise, which we can summarize in three important points: the regulative norms that some governments want to implant on her, the global demonetization and the arrival to the United States government of Donald Trump.
The rise of bitcoin in China
Most transactions with bitcoins are made in China, so any rise in demand for the virtual currency directly affects its total value. For this reason, the Chinese authorities are considering different regulatory policies, which may explain their rise in the country.
Among these policies we can find from restricting the domestic exchanges of bitcoins, moving the cryptonnet to platforms located outside the country, passing through the imposition of quotas on the amount of coins that can be sent abroad.
Currently there is a limit of $ 50,000 per year that Chinese citizens can send outside the borders of the Asian country that is "restarted" every January 1st. With the next "restart" of this limit could increase the pressure to take capital from the country to the collapse of the yuan, because possibly a large part of that capital comes in the form of bitcoins.
From the Chinese government know that this can happen, hence that control is established to prevent massive exodus of money. In addition, the relationship between the devaluation of the yuan and the increase in bitcoin confirms that the criptomoneda has indeed been used to circumvent the annual limit of which we have spoken somewhat above.
Global demonetization also influences
Another cause may be in the processes of demonetization in other countries, with some currencies that suffer restrictions on their circulation and the use of national bills. India is the first and most striking example of this phenomenon, which can now be observed in other countries around the world and which has allegedly been initiated to combat corruption and money laundering.
In India this phenomenon is very remarkable, due to the ban of 500 and 1,000 rupees. It is a country where the economy is based primarily on cash, and where sectors such as agriculture and fisheries must sell their product at low prices to enter the market.
The ban has been going on for a month now, and banks can still see queues of people trying to change the bills that are no longer worth anything. Businesses have also been forced to look for alternative methods of economic transaction within the country, which has led some of their citizens to buy bitcoin to protect their assets.
For its part Venezuela also suffers this phenomenon. The government of Nicolás Maduro has announced the withdrawal of the 100 bolivars of legal tender, which gave rise to riots throughout the country. The entry into force of the law has been delayed, although the government intends to carry it out at all costs.
The events resulting from this withdrawal could lead Venezuelan investors to change their capital in cash for bitcoins, which would protect the amounts they have not being divided into bills that soon cease to be legal tender.
The next on the list is Pakistan, which has announced that soon Pakistani Rupees 5,000 bills will be withdrawn from circulation. The situation has led some citizens to start looking for decentralized currencies in an asset that is more or less safe for their economy.
Finally we comment on the case of Spain, where the Ministry of Finance will limit the cash payment to 1,000 euros. The measure, which took effect last Friday, has been presented as a way to fight against tax fraud. Some media are feared that this will boost the submerged economy, although probably that undeclared money will go to decentralized and anonymous platforms that allow it to move more easily.
All of these scenarios are situations with a high level of uncertainty. One of the easiest ways to ensure that the amounts that investors have is going to stay roughly the same, is to buy bitcoins. Thus the money leaves the bank accounts, lodged in a digital portfolio that only responds to the chain of blocks and not before regulatory authorities of any kind.
The uncertainty generated by the Trump Administration
In a sense, we can compare the arrival of Donald Trump to power in the United States with a nuclear apocalypse à Fallout 4. The public is not sure what will happen, except perhaps the obvious. This "apocalyptic scenario" explains the investment in bitcoin and gold that was when the millionaire came to power.
As we said earlier, in uncertain situations, investors are looking to protect their assets. Bitcoin, as a way of doing so, has a great advantage: it is stored digitally, can be moved more easily and can be traded with fewer impediments than a physical asset.
Analysts predict a "volatile economy" and even a new recession during the Trump Administration. Given the possibility that the US economy is going through a new period of crisis (and given the upward trend of bitcoin in those times), the safest investment is to buy criptomoneda to prevent the value of money collapsing.
And now that?
A rise in the price of bitcoin, despite these three scenarios, is due to purely defensive causes and to the Law of Supply and Demand itself. Investment groups do not want to see their money running through the gutter in case of disaster: they look for a safe way, if not to win, to at least keep their money as intact as possible. It buys more virtual currency, therefore there is more demand. If there is more demand, the higher the value of the currency.
We asked our colleague Raúl Jaime Maestre from El Blog Salmón his opinion as an expert to try to clarify this matter better. He reminded us that "we already talked about hosting bitcoin in Greece" as a safeguard to the exit of the euro, which in his opinion, and matching it with the scenarios we propose in this article, make it "a refuge for investors" .
The reasoning has its raison d'être, and is the great advantage of Bitcoin against other currencies: it is not "regulated by any body such as the ECB and the Federal Reserve and therefore can be lifted many situations." According to Raúl, "his contribution will not depend on political interests", so it can be used in many cases.
It is difficult to make a prediction about what will happen considering the three situations we talked about earlier. Deregulation "generates a lot of mistrust", so "markets must have enough confidence to bet on this virtual currency and have the security that has a stable price."
It is worth noting that the profitability of bitcoin is currently quite high, "reaching 20%" and that, as we said before, "profits or losses due to currency changes are eliminated when a payment is made in Different countries with different currencies ", so you do not lose the value of money.