Bitcoin at 2 Yr High on Shrinking Supply
Bitcoin runs to a 2-year high on speculation that the supply of the digital currency will shrink.
The crypto-currency rallied to $696.5 Monday in Hong Kong, the highest since February 2014. It was trading at $689.23 as of 3:50p in Hong Kong, + 19% from Friday.
Profits from mining Bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi.
Increased attention from venture capitalists and banks on blockchain, the technology of digital ledgers, has boosted Bitcoin’s legitimacy, Jack C. Liu, chief strategy officer at OKCoin, said in Hong Kong.
“The halving of the supply of Bitcoin is attracting many retail investors,” Mr. Liu said. “…we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.”
The price of Bitcoin has mostly recovered following a steep decline to less than $200 in January of last year from more than $1,000 in December 2013.
Bitcoin’s rebound is coinciding with weakness in the RMB Yuan, which fell the most in 2 months Monday in Shanghai.
Losses have grown in recent weeks as the USD strengthened and China’s economic outlook deteriorated.
Monday’s data showed industrial output rose 6% in May from a year earlier, while fixed-asset investment increased 9.6% in the 1st 5 months of Y 2016, missing all 38 economist forecasts.
The RMB Yuan is trading near the 5-year low it touched in January, while the Shanghai Composite Index is this year’s worst performer among 93 global stock measures.
Bitcoin was created in Y 2008 under the name of Satoshi Nakamoto, a programmer or a group of programmers, and does not operate through a central bank. Rather a network of volunteers validate transactions via their computers, which require encrypted electronic signatures, and in return earn fees based on market prices.
In Q-1 of Y 2016, venture capital investment in startups commercializing blockchain reached $1.1-B, according to industry researcher CoinDesk. The US Commodity Futures Trading Commission (CFTC) officially classified Bitcoin as a commodity in Y 2015.
“The halving of production has fueled expectations of supply reduction,” said Li Lin, founder of Huobi. “Use of bitcoin has become more common among the public, giving its development a more favorable social environment.”