Bitcoin gained more value than all other currencies in 2016, according to Bloomberg, driven by China’s crackdown on the yuan, isolationist rumblings in the U.S. and the U.K,. and increasing acceptance by consumers and businesses.
Bitcoin’s price surged 79 percent since the start of 2016 to $778, its highest level since early 2014, data compiled by Bloomberg indicated. That quadruples the gains posted by Russia’s ruble and Brazil’s real, the world’s top two hard currencies.
“There are starting to be consumer uses for bitcoin, and if people have any concerns about their own fiat currency — the rupee, for example — they flee to bitcoin as an alternate currency,” said Tim Draper, a venture capitalist who has bought thousands of bitcoins over the years.
Bloomberg cited five reasons for bitcoin’s growth.
Global restrictions on foreign currencies was cited as the first reason. The Chinese government made it harder for people to spend money overseas, resulting in trapped liquidity. Because bitcoin is not government controlled, it became more attractive.
Government restrictions on remittances was cited as the second reason. These policies limit peoples’ ability to send money to other countries, driving the demand for bitcoin, which can be sent across borders more easily. U.S. President-elect Donald Trump said he will halt or limit remittances to Mexico unless it agrees to pay for a wall between the two countries.
The slowing growth of bitcoin’s supply was cited as the third reason. The payment to miners for creating bitcoin fell by half in the middle of 2015.
Increased acceptance by consumers and businesses was cited as the fourth reason for bitcoini’s surge. More consumers are using bitcoin and more companies are accepting it as a form of payment.
Government crackdowns on corruption and the war on terror was cited as the fifth reason. Governments are increasing requirements for foreign assets in an attempt to reduce corruption and terror financing, driving the demand for bitcoin for those who wish to escape government oversight.
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