Bitcoin flies, then falls, again
After soaring to a record high of 19,084 yuan ($2,784) on May 25, the price of a Bitcoin in China had tumbled more than 20 percent by Wednesday as investors took profits, an analyst said. Since the beginning of 2017, the price of Bitcoin has skyrocketed more than 130 percent, driven by higher transaction prices overseas, a Bitcoin scaling agreement and the promise of the cryptocurrency's underlying blockchain technology. Although some industry insiders were optimistic about Bitcoin's prospects, they advised investors to be cautious because of its wild price swings. Still, industry insiders predicted that Bitcoin may become a popular payment method, once problems like high service fees and slow transfer times are overcome.
Driven by favorable factors including a Bitcoin scaling agreement, higher prices in Japan and South Korea and the promise of blockchain technology, the price of Bitcoin in China rose to a record of 19,084 yuan ($2,784) on May 25, before tumbling more than 20 percent to 14,099 yuan by 2 pm Wednesday, according to the domestic Bitcoin trading platform huobi.com.
As of Wednesday, the price of Bitcoin has surged more than 130 percent in 2017, data from huobi.com showed.
A Bitcoin scaling agreement has contributed to Bitcoin's recent surge, though risks have piled up in the short term, leading some investors to sell their Bitcoins while prices remained high, an industry analyst told the Global Times on Saturday on condition of anonymity.
At the Consensus 2017 conference held in New York on May 23, 56 digital currency companies from 21 countries and regions joined a Bitcoin scaling agreement that will allow for faster Bitcoin transactions.
Along with the agreement, the promise of blockchain technology has also pushed up Bitcoin's price in China, experts noted.
Blockchain is the technology upon which Bitcoin was built.
In July 2016, the number of Bitcoins created from one block was halved to 12.5, said Zhu Jiawei, chief operating officer of huobi.com. There are now around 17 million Bitcoins in circulation.
Besides, more global financial institutions have acknowledged the importance of blockchain. Over the last two years, domestic and foreign financial institutions have been pouring money into researching and developing blockchain technology and its applications, Zhu said.
Soaring prices in other countries and regions, especially Japan and South Korea, have also contributed to Bitcoin's latest prices surge in China, an industry insider said on condition of anonymity.
In Japan and South Korea, the digital currency is trading at prices about $300 higher than the global average, Reuters reported Friday, citing data from the Bitcoin trading platform cryptocompare.com.
After Chinese regulators strengthened supervision over Bitcoin trading in January, domestic trading platforms began to deleverage and charge transaction fees to curb speculation, the industry insider said.
Currently, Bitcoin transactions in yuan account for only 15.3 percent of the total worldwide, according to a statement huobi.com sent to the Global Times on Saturday. Bitcoin transactions in yen and dollars respectively account for 37.6 percent and 27.9 percent of the global total.
Wild swings
Since Bitcoin's inception in 2009, it has gone through several cycles of booms and busts. In 2013, the price of the digital currency hit a then-record high of $1,147, only to plunge back to around $100 by January 2015, the Xinhua News Agency reported Saturday.
On January 5, 2017, the price of Bitcoin in China plunged more than 30 percent to 6,000 yuan.
Although Bitcoin is known for its wild price swings, it is unlikely to crash in the short term, said Liu Dingding, an independent industry analyst based in Beijing.
Due to its limited supply, the currency has become virtual collection, Liu told the Global Times on Tuesday.
One Bitcoin investor living in Beijing, who spoke to the Global Times on Tuesday on condition of anonymity, said she had received offers to buy her Bitcoins at a price of 17,500 yuan per Bitcoin, but she refused because she thinks the price still has room to rise.
Since Bitcoin's inception, transaction volumes have grown and the market has become more regulated, Zhu said. More than 10 million people have bought Bitcoins since 2009.
Bitcoin investors are primarily educated young men with investment experience, according to the statement from huobi.com. About 84.4 percent of the investors are men, though the number of female investors has been growing. Bitcoin investors in their 30s account for 48.7 percent of the total.
Liu warned that Bitcoin can be used to launder money or to commit other crimes.
In January, the People's Bank of China (PBOC), the country's central bank, began to dispatch on-site inspection teams to investigate major Bitcoin exchanges including huobi.com and OKCoin to determine whether they have complied with foreign exchange management regulations and provisions against money laundering, according to a statement on the PBOC's website in January.
Industry insiders also warned investors of Bitcoin's volatility amid policy uncertainties and technology risks, but retained a positive outlook for the digital currency's long-term prospects.
Growing acceptance
Bitcoin's popularity has also been driven by support from governments in several countries and regions. In April, Japan announced that Bitcoin had become a legal payment method in the country.
On May 22, Japan's Peach Aviation said it would accept Bitcoin as payment for airline tickets, becoming the first Japanese airline to do so, Bloomberg reported on the same day.
Russia's online retailer Ulmart has also announced that it will accept Bitcoin, even though the Russian government had said that it wouldn't explore the virtual currency before 2018, online publication Business Insider reported on May 24.
As a payment method, Bitcoin has weaknesses including high transfer fees and slow transaction speeds, Xu Baolong, head of the Huobi Blockchain Research Center, said Saturday, noting there were 150,000 transactions at the time waiting to be confirmed on the platform.
If the Bitcoin scaling proceeds smoothly, blockchain will be capable of handling more transactions, so -service fees are expected to fall, he said.
The independent analyst Liu said that much like fine chinaware, Bitcoin can be an investment commodity, but not a mainstream global currency.
However, Zhu from huobi.com told the Global Times on Saturday that Bitcoin may be a global financial asset.
"As a decentralized asset, Bitcoin doesn't depend on any country or organization, making it an asset that can be allocated globally," he said.
