Bitcoin is on a tear.
The price is up over five percent in today’s session alone and is looking set to have doubled in 2016 with just over a week of the year left. The total value of all bitcoins in circulation has climbed above $14bn today.
The reason behind this latest boom is pinned on recent events in both India and China, where bitcoin has enjoyed quite a year — though political upsets and geopolitical unrest around the world has also proven to be a boon for the decentralised virtual cash.
The majority of bitcoin trading is done in China, so any increase in demand from there tends to have a significant impact on the price. Meanwhile demonetisation in India and global political and financial uncertainty have also boosted bitcoin demand.
Globally, reports of bitcoin’s demise have been much exaggerated with volumes still rising strongly around the world. However, it’s a rapid uptake of the cryptocurrency in east Asia that has today pushed bitcoin to its highest price in almost two years.
Last month Indian prime minister Narendra Modi attempted a crack down on the country’s rampant corruption and counterfeit currency by axing India’s two largest Rupee banknotes, the INR500 ($7.50) and INR1,000.
This caused chaos across the country, with long queues and riots outside banks as panic-struck people scrambled to get their notes converted ahead of the deadline.
In terms of the value, the notes to be withdrawn account for a whopping 86 percent of the total value of all Indian bank notes in circulation according to the Reserve Bank of India.
The flight from higher domination notes to bitcoin will be a concern for Modi and the Indian government. Modi was elected on an anti-corruption campaign in 2014.
Interestingly, gold — a traditional safe-haven asset — has fallen steadily since the start of November as global markets bet on big spending by the incoming US Trump administration.
There are also fears that the government could be planning a ban on gold imports after the precious metal — with the majority of the world’s holdings already in India — reached a two-year high in November.
Some now suspect the government to be considering a crackdown on bitcoin as people look to hide assets from government taxation.
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The virtual currency — which is still just eight years old — is viewed as a safe haven from wild economic fluctuations such as those recently seen in the case of hyperinflation-plagued Venezuela.
Earlier this year the Chinese government moved to put in place capital controls that restrict overseas investment by Chinese corporations and crackdown on Wealth Management Products (WMPs).
This sparked a surge in interest in bitcoin though just shortly after the measures were proposed China’s regulators began looking into measures to limit transactions that use bitcoins to take funds out of the country, according to Bloomberg reports, citing people familiar with the matter.
Bitcoin’s popularity in China has been growing over several years after a number of Chinese government bodies — including the People’s Bank of China (PBOC) and the country’s financial regulators — said in a joint notice that bitcoin functioned like a digital commodity without the legal status of a currency.
The central bank has said it is looking into issuing its own digital currency and is trying to get something to market as soon as possible.
Though China dominates bitcoin mining and trading, the government has shown caution over its spread and in 2013, the PBOC barred financial institutions from handling bitcoin transactions.