On May 27 Chinese investors have started pumping up Bitcoin, adding USD 1.2 billion in market capitalization for all Bitcoin in circulation, according to wsj.com. On May 30, prices have moved up as high as USD 525.49 per Bitcoin.
Chinese Bitcoin exchanges have been operating despite past efforts by Beijing to control trading in the currency, which is not subject to any central authority and which can be traded almost instantly across borders.
Past experiences have shown that massive surges of new investing, often followed by a collapse in prices as funds have moved elsewhere. Expectations that new supply of the virtual currency will decrease next month could also be behind the latest price surge. The creation of Bitcoin via a complicated computing process called “mining” gets more challenging over time, due to a mechanism that cuts the number of Bitcoin that can be created in half every four years in order to limit supply.
Bitcoin currently trades at a 7.2% premium when priced in Chinese yuan on mainland Bitcoin exchanges compared with counterparts pricing the currency in USD, according to industry tracker Bitcoinity.org.
This premium in Chinese prices has persisted throughout 2016, suggesting that demand from the country has accounted for much of Bitcoin’s recent gains.
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