Bitcoin Hits Highest Level Since 2013 on Fears of a Market Crash and Political Instability
It’s a veritable cryptomania. The total value of Bitcoins in circulation surpassed the $14.0-billion mark. That means the total market capitalization of bitcoin exceeds Twitter Inc (NYSE:TWTR) Not surprisingly, this has opened a bullish scenario for the cryptocurrency. Fears of a market crash and political instability explain its rising popularity.
Bitcoin prices have risen five percent since the beginning of the day to reach a three-year high. The price of bitcoin reached $875.00, more than twice what it was at the beginning of 2016 when it cost $435.00. Global political instability plays a major role. But so does concern of overheated expectations and a market crash.
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From the risks of worsening Russian relations with the West to a collapse in Venezuela, many factors could poison the finance well. Bitcoin has gained a reputation as a safe haven against this kind of risk.
Many experts link this increase to the depreciation of the yuan, which has lost almost seven percent against the dollar. The market course, or demand, for Bitcoins relates to China, where any increase in demand for the yuan has a significant impact on the value of this virtual currency.
Last May, during another period of yuan and Chinese market volatility, Chinese investors were drawn to Bitcoin. Bitcoin is a cryptocurrency that can be exchanged quickly and anonymously worldwide. There are no intermediaries.
Therefore, Bitcoin appeals to those who wish to avoid capital controls such as those existing in China. Yet, despite the recent surge, Bitcoin’s price remains distant from the record reached at the end of 2013. That’s when it hit $1,163.
But it’s not just China. Bitcoin’s rise owes much to India as well. It has experienced a spectacular course in recent months. In India, many households were burned in November by their government’s decision to demonetize the large denominations of the 500 and 1,000 rupee banknotes.
This was an effort to combat the black market, the underground economy, as well as corruption and tax evasion. But those notes accounted for over 80% of the currency in circulation. Not surprisingly, many Indian citizens chose to buy some bitcoin, deeming it a more credible currency.
Thus, given the right conditions, Bitcoin has managed to earn a reputation as a safer vehicle to store value than many Asian currencies, whether it’s the rupee or the yuan.
