Bitcoin, the most famous digital and crypto currency, has an enormous surge of value with more than 70% raise in a month. A movement that surprised every body amidst a global economic slowdown, is coming from Chinese capital outflow invested in bitcoin.
According to Bloomberg's data, a seven-week winning streak of Bitcoin is the longest since November 2013. People in the market believed there are two big reasons for this rally. The first is enhanced interest and acceptance from established financial companies like Goldman Sachs, Morgan Stanley. Together with other firms that also have taken interest in bitcoin and its blockchain technology to overhaul their trade of securities, derivatives, and loans. The second one is a market turbulence in China. As economic slowdown hit Chinese market this year, investors need to find a way to get their money out of the country. Bitcoin provides just what they need, as Bloomberg also reported that in September, capital outflow from China reached $194 billion. The number added up to this year's into $669 billion. Nevertheless, Chinese government will surely fasten their monetary policy to prevent more capital coming out of the country.
Fortune made a remark since October 2, when bitcoin reach $300 value as the first time since July, and March. On both occassions, a certain event drive the price up. July is the time when Greece underwent economic collapse. During that time Greek citizens are unable to access their bank account, and many bitcoin companies attempt to harness opportunity to drive Greeks into digital currency. While in March, announcement of funding and big executives appointment to bitcoin companies drove the price up. Those two cases showed how volatile bitcoin value is. Another case is in January 2014, when bitcoin hit the highest $1,000 mark, then plunged and never reached that number again. Some bitcoin expert believe that bitcoin price could stay in low hundreds, but as long as it stays stable that is good for the currency.
Therefore, CNBC warned the investor to be careful, because bitcoin is a relatively illiquid market, so its exchange rate against major world currencies has been historically volatile. Although volume from the Chinese bitcoin market has been "off the charts," but Beijing policy in tightening capital controls may spurr price gains.
A sudden raise of bitcoin value is driven by capital outflow from China. Nevertheless, due to its volatility and illiquid market, bitcoin sudden raise can also plunge unexpectedly.
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