Bitcoin’s price continues to rise since it has started to reach the $500 barrier for the first time in 20 months this first week of June. As of this time of writing, the price has hit the $700 mark. Mainstream media such as Wall Street Journal have reported that the price surge has been led mainly by the exchanges in China.
According to Charles Hayter, Co-founder of Cryptocompare.com, the price surge is tied with the IMF (International Monetary Fund) warning to China on its corporate debt height. China’s debt rose to a 237% record in the first quarter as China implements massive lending to help boost the economy. IMF warned that the debt risks will spark bigger crises if the authorities fail dealing with it.
The corporate debt risk in China is making Bitcoin more attractive to investors. Many have been considering that the price surge is driven by capital controls in China. Hayter also added that they are taking advantage of Bitcoin traders as a medium to avoid capital controls and the volatility of Bitcoin to execute more complex strategies in trading. Chinese government law stipulates that no one can send more than $50,000 a year out of the country. In order to bypass the control, individuals hired smugglers to carry cash out of the country. Thus, the primary driver for the price surge has been Chinese people buying Bitcoins to get around capital controls.
Everything is just a speculation
On the other hand, there are some experts who disagree to this speculation. As the Founder-CEO of BTCC, Bobby Lee said in an interview at Bitcoin Magazine, that even so the bypassing of the capital controls in China is definitely a cause for Bitcoin’s price surge; it is not the main reason. He said that in reality, there are a lot of escapes around the capital control aside from Bitcoin. He added that countries like Myanmar and Argentina are stricter and you will have the Bitcoin price much greater.
Even as the president of OKCoin, Jack Liu disagreed to the notion. He said in an email to Bitcoin Magazine that everything is just a speculation. He said that the price is recovering from several months in a narrow level. A few Chinese traders convey a view on the CNY exchange rate subsequent to the preceding deflation, and Chinese speculators had interest in moving to other resources after the stock market fallout.
In addition, Bobby Lee explains that all these good news happening to Bitcoin over the last two months is because of renewed interest. All the bad news over the past 18 months is over. He enumerated some such as the Mt. Gox, China giving indefinite opinion on Bitcoin and the Silk Road. He said that the Bitcoin community is in a bear market for the past year and a half and with this, the miners are forced to sell Bitcoin since the future price is uncertain. He added that there is a constant selling pressured caused by miners.
Lee believes that the main reason of the price surge is mostly new users. The law of scarcity states that if Bitcoin is in more hands, the price naturally increases. In short, according to Lee, the only reason why Bitcoin’s price goes up even in the previous years is more usage and this run-up will encourage more people to discuss Bitcoin. As more people are aware of the digital currency, more people will use it and will definitely drive the price to the top.