(snip)
Various catalysts for the recent surge have been cited,
chief among which is the ongoing crackdown against cash in India providing a
new source of demand for bitcoin. However, the most immediate driver of the
recent burst in Chinese demand originates, not unexpectedly, from China where
Beijing over the weekend implemented even more of what we have said
since September 2015 will keep pushing bitcoin relentlessly higher:
capital controls.
Recall that as we noted over the weekend, in order to
further curb capital outflows, Chinese banks will be required to report all
yuan-denominated cash transactions exceeding 50,000 yuan (around 7,100 US
dollars) to the People's Bank of China (PBOC), down from the current
level of 200,000 yuan, according to a PBOC document released on Friday.
Cross-border transfers more than 200,000 yuan by individuals will also be
subject to the report process. In terms of foreign currencies, the report
threshold remains at the equivalent of 10,000 US dollars for both cash
transactions and overseas transfers.
How do we know that this latest PBOC intervention in capital
markets was merely the latest form of capital controls? Because the PBOC
immediately said it wasn't.
As Xinhua
reported overnight, "the policy stoked worries that the government is
trying to impose capital control in a disguised form."
"It is not capital control at all," central
bank economist Ma Jun said.
Actually, imposing limits on capital movement, i.e.
controls, is by definition just that.
I recently recommended Bitcoin as a top speculation for 2017. I still think it could move materially higher. However it is being used mainly by Chinese citizens to skirt capital control laws in China. If it continues to grow, as it currently is, at some point the Chinese government is going to slap it down and then we will see a big dip in Bitcoins price. It is interesting to note that several times in Bitcoins short history it has run up a few hundred percent only to drop well over 50%.
I think Bitcoin long term has a bright future however right bow it's price is being driven higher by Chinese nationals trying to get capital out of China before the currency loses more value. Caveat Emptor
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