By
Steve Muchoki
April 18th, 2024
The upcoming halving event next month and Chinese yuan weakening have considerably boosted the bitcoin price.
The supply of bitcoin is to be shrunk next month and now we are observing an incredible price hike. The bitcoin currently makes up $691, the highest since February 2014, while last week it was only approaching $600.
Bitcoin has overcome both its golden time of more than $1,000 in December 2013 and a sharp drop to less than $200 in January of last year.
Bitcoin is initially designed in such a way that it relies on “mining” computers validating blocks of transactions by competing to solve mathematical puzzles every 10 minutes. The first computer to succeed gets a reward of 25 new bitcoins, worth around $13,500. According to the plan of Satoshi Nakamoto, bitcoin’s creator, the reward must be halved once in four years, in order to keep a lid on inflation. The nearest halving date is July 10.
“The halving of the supply of Bitcoin is attracting many retail investors,” said Jack C. Liu, chief strategy officer at OKCoin. “More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.” He underlined that blockchain, or to be more exact, the increased attention blockchain has been getting recently, has boosted bitcoin’s legitimacy.
Venezuelan-Panamanian trader Gerardo Mogollón confirmed the connection between bitcoin price and the upcoming halving event. He told The Merkle: “Every asset traded in the world is affected by the law of supply and demand, if you effectively halve the amount of Bitcoins produced every 10 minutes the price will go up, there is just so much at stake in the game.”
Why Does Yuan Have Such a Strong Impact on Bitcoin?
It can hardly be named a play of chance that such a noticeable rebound in bitcoin price coincides with yuan weakening. Yuan has just fallen the most in two months on Monday in Shanghai. Bloomberg informs that data Monday showed industrial output rose 6 percent in May from a year earlier, while fixed-asset investment increased 9.6 percent in the first five months of 2016, missing all 38 economist forecasts.
Such a significant impact from China is explained rather easily – around 95 percent of all bitcoin trading is done via Chinese exchanges. Thus, any increase in demand from this country has a great impact on bitcoin operating all over the world.
“What we’ve seen over the weekend is more of the same: Chinese fear of a slowing economy and the yuan potentially looking to make another move lower,” said Ryan Rabaglia, head of wholesale product management at ANX International in Hong Kong. “Each time we see yuan weakening we tend to see triggering of capital outflows out of China and bitcoin has been on the winning end of that.”
Brexit and Bitcoin
The Merkle is talking about Brexit (withdrawal of the United Kingdom from the European Union) as one more possible reason for prices increase. The decision on the United Kingdom will be made on June 23 when voters will decide the country’s future.