The adoption rate of Segregated Witness (Bitcoin Core 0.13.1 release) is rapidly growing and the demand for bitcoin from Chinese buyers and investors is gradually increasing. Experts predict this trend will allow bitcoin to reach $800 by the end of November.
Although some developers and cryptocurrency enthusiasts suggest that Bitcoin Core releases and the team’s scaling solutions have a minimal impact on the price of bitcoin, positive information on the development of bitcoin is often reported on mainstream media outlets which allows conventional investors to consider bitcoin as a potential investment opportunity.
For most cases however, it is regulations and instability in stock markets that usually push the bitcoin price to new highs. Recently, the price push has been most affected by the tightening financial regulations of China on Wealth Management Products (WMPs), which forced high profile investors and traders of US$1.3 trillion in assets to seek for alternative assets.
Currently, the Chinese government is attempting to move investors away from its real estate bubble. Because of this movement, investors and traders are essentially left with five investment selections: stock market, WMPs, Chinese yuan, precious metals and bitcoin.
To evaluate the demand for bitcoin in China, the optimal measurements to observe are the stock market performance of the Shanghai Stock Exchange Composite Index and regulatory policies on WMPs.
Since the beginning of 2016, the Shanghai Stock Exchange Composite Index has been in a downward trend. It started in the 3.4 million trading range and it rapidly declined to around 3 million on average. Annual return for the first time in many years is set to be negative and is estimated to be -3.96%.
Bloomberg also reported that US$1.3 trillion are locked up in local WMPs. Almost immediately after the Chinese government a crackdown on these WMPs, the price of bitcoin started to surge.
At the moment, the price of bitcoin in most markets are around US$750, with China and Japan demonstrating a slight premium of 4 to 6 dollars.
To prevent their wealth being regulated and controlled by the Chinese government and its capital controls, high profile investors and traders will continue to seek for alternative investment opportunities. Precious metals like silver and gold are inefficient forms of assets due to its limitation in transportability. More importantly, most gold transfers are taxed and regulated by local governments.
Thus, the only efficient form of asset for Chinese investors at the moment is bitcoin, considering its high liquidity and decentralized characteristic that renders government capital controls unnecessary. Furthermore, with bitcoin, Chinese investors can avoid heavy tax regulations on assets and other conventional forms of investments.
If the demand for bitcoin in China, South Korea and Japan continues, the price of bitcoin is likely to surge throughout 2017. Some experts predict a value of over US$1,000 in the first quarter of 2017, based on the current trend in bitcoin trading.