Beijing News, a prominent Chinese mainstream media outlet, stated in a recent coverage of bitcoin that the rapid growth of the digital currency is directly attributable to vulnerable monetary systems which serve the global financial ecosystem as its backbone.
Over the past two weeks, bitcoin reached an all-time high price at 8,895 yuan in the Chinese market, surpassing the previous record set in late 2013. However, a sensible statement from the Chinese government and its central bank the People’s Bank of China was misunderstood by the media, leading to a 21% decline in the price of bitcoin.
As predicted, bitcoin quickly recovered and gained momentum, rising back to the $900 trading margin for both the Chinese and global bitcoin market.
Regardless of the controversial announcement and media coverage this past week, bitcoin still recorded a 14.1% monthly increase in value, increasing from $773 in early December to $900.
Several mainstream media outlets including Beijing News stated that bitcoin’s resilience and ability to recover ultimately stems from its consumer base, that are currently holding bitcoin to speculate the market. The Beijing News claimed that nearly 90% of bitcoin users are still speculators and a small niche market exists wherein users actually utilize bitcoin as a currency and a store of value.
Thus, amid economic uncertainty and financial instability, analysts at Beijing News explain that the 90% of speculators move to bitcoin in an attempt to protect their assets. In other words, the vast majority of bitcoin users are relying on the digital currency to avoid vulnerable monetary and financial systems.
In the end, it comes down to the decline in trust and confidence from the general population towards traditional banking systems and financial services. Consumers have begun to lose credence in current monetary systems revolving around cash. Banks have lost reliability after various cases of corruption and unlawful activities were unraveled over the past few decades.
Yang Guoying, analyst at Beijing News and researcher at China Financial Think Tank, wrote:
“The vulnerability of the current monetary system is an important reason for the prevalence of Bitcoin.:
Guoying further emphasized that bitcoin reflects attributes of an efficient and practical currency, if it succeeds to solve various problems involving scalability and privacy. Because the number of users seeking out for bitcoin as a store of value and currency is rapidly increasing, Guoying noted that it will be interesting to see how bitcoin operates side by side with existing monetary systems and regulatory frameworks.
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