Bitcoin: Money Revolution or speculative bubble?Behind the rise of bitcoin(II)

II. Behind the rise of bitcoin: speculative demand and inadequate supervision

Since 2013, bitcoin trading has been active, and the price once showed an explosive upward trend. From the lowest price of US $66.34/pc in 2013 to the highest price of US $19187.78/pc in history, it has appreciated nearly 300 times. What makes bitcoin rich? We think we need to discuss the reasons for the crazy rise of bitcoin from the perspective of speculative demand and regulation._DJMINER

1. Bitcoin speculative demand led price rise

As a trading product, bitcoin has many advantages: convenient account opening, low transaction threshold, low handling fee, 24-hour trading and no geographical restrictions. These advantages make the transaction volume of bitcoin rise rapidly, with daily turnover from the lowest point of $2.86 million, and once reached $21.8 billion on December 21, 2017.


Bitcoin plays a leading role in the mainstream digital currency, and Chinese investors pay more attention to short-term profits. As of March 28, 2018, the closing price of bitcoin is $8039.86/pc, the total circulation volume is 16.95 million, and the circulation market value is $120.148 billion, accounting for 45.84% of the total market value of mainstream digital currency. According to the global bitcoin Development Research Report, bitcoin transactions in China account for 80% of global bitcoin transactions. According to the report's sample survey of users of fire coin network, bitcoin investors are mostly 30-39 years old, accounting for more than 80% of the investors with high school education or above, and it practitioners account for about 35.45% of the total users. 80.77% of bitcoin investors take short-term profits as their purpose, and only 13.81% of users choose long-term holdings.


Bitcoin may be used by some funds as a channel to bypass foreign exchange control. China has a foreign exchange quota control of up to 50000 US dollars per person per year. In 2016, the devaluation of RMB was large. Some domestic investors sought investment channels other than gold, or bypassed the capital control to transfer funds overseas. They buy bitcoins on domestic exchanges, then transfer them to an overseas exchange, and finally sell them to obtain dollars or other foreign currencies. According to the Wall Street Journal on November 7, 2016, Chinese investors are buying bitcoin aggressively at a time when the RMB is falling. The total global trading volume of bitcoin reached 47 million in the week of October 24, 2016. The trading volume of the three domestic bitcoin exchanges accounted for 98% of the global trading volume in July October 2016.


ICO has become a new financing method in the field of blockchain. ICO (initial coin offering) refers to financing by issuing crypto tokens and quickly leading the financing of blockchain start-ups. Compared with IPO Financing Mode, ICO has the characteristics of small regulatory restrictions, fast financing speed, not limited by cross-border financing laws. On March 19, 2018, the U.S. House of Representatives passed the "rega + regulation Amendment Act", which increased the upper limit of securities issuance by enterprises by 50% to $75 million, and can be applied to ICO issuance. In September 2017, the financing scale of filecoin reached US $257 million, while in 2018, the cumulative financing scale of Russia's telegram has reached US $1.7 billion, setting a new record of ICO project financing. However, the ICO project requires a high level of knowledge about investors and blockchain. At present, the international community's supervision of ICO financing mode is not perfect, and there is no mature legal mechanism to protect the legitimate rights and interests of investors._DJMINER

2. Inadequate supervision provides a loose environment for speculation

Lack of supervision is an important external factor that spawned bitcoin price bubbles. Due to the great differences in the development of financial markets, the strength of central government and the conservatism of investors, the regulatory attitudes towards bitcoin vary from country to country. At present, Russia, Iceland, Bolivia, Ecuador, Kyrgyzstan and Vietnam are the only countries that adopt a strict ban on the bitcoin. However, developed economies such as the United States, Germany, Switzerland and Australia have relatively loose supervision over the special currency, only including it in their own regulatory framework.


Comparing the regulatory policies of different countries and regions, it can be seen that the regulation of bitcoin in the United States and Singapore is relatively loose, and it is clear that bitcoin does not have the status of credit currency, but can be used as a financial asset for investment. China, France, Japan, EU and other countries and regions have introduced relatively strict regulatory measures on bitcoin. Bitcoin is not recognized as a real currency and cannot be used as a currency in the market, but no relevant laws and policies have been formulated to protect the interests of investors. We believe that relatively loose regulation and relative lag in legislation are important external factors for the continued expansion of bitcoin bubbles._DJMINER