Bitcoin price is surging. The price of the cryptocurrency has scaled the $700 milestone in a formidable October rally.
The current rally, the likes of which hasn’t been seen since June 2016 when bitcoin price jumped from $578 on June 10 to $794 to $766 on June 16, in less than a week. At the time, demand for bitcoin rose significantly with investors turning to the cryptocurrency in anticipation of the UK’s EU referendum which saw Britain exit the European Union.
The latest jump in a near month-long sustained price swell began early this weekend. The Bitstamp Price Index (BPI) registered BTC to USD price at $687.21 at 01:45 UTC before stepping up a gear to trade at $696.52 at 02:05. A steady trading period followed before bitcoin price struck $700 at 07:45, a number unseen since June and one brief trading period on July 2. At the time of publishing, the BPI shows bitcoin price at $713.71.
Market observers point to Chinese investors as the driving force behind the surging demand for bitcoin, in an economic climate that sees the yuan falling for its fourth week against the dollar, while already trading at a near six-year low, as reported by Bloomberg.
Fundamentally, bitcoin buying is a way to hedge against the depreciating yuan for Chinese investors.
Furthermore, the yuan is to seeing its biggest monthly drop since the unexpected devaluation of the currency by China’s central bank in August 2015. At the time, global markets watched on in disbelief as the People’s Bank of China weakened its exchange rate by 4.4% in three days. So far, the yuan has fallen 1.6 percent this month, down to 6.780 to the dollar. A weakening yuan equals increased demand for bitcoin among Chinese buyers in a country that makes up for a significant majority of the world’s bitcoin trades.
The lack of intervention by Chinese regulators and authorities is adding to the uncertainty and gloom surrounding the yuan. Speaking to Bloomberg, one market expert from Hong Kong stated:
We keep hearing that there’s no basis for it to decline, and it keeps declining. If they [the Chinese central bank] don’t want it to decline, then raise interest rates, or intervene. Otherwise, markets will decide on value.
And so it shows, with investors turning to bitcoin instead as a store of value, all through October.
Other macroeconomic factors including any scenario of a Federal rate hike and even the upcoming US elections could render traditional markets volatile, spurring even more demand for bitcoin which could propel its value further in the final months of 2016.
Image from Shutterstock. Chart from BitcoinWisdom.