China shows more love to Bitcoin thanks to its innovative payment system that presents a way to dodge the government’s corruption crackdown as the country experiences declining stock prices amid speculations of yuan devaluation.
According to Seeking Alpha, Bitcoin and China's "love affair" was rekindled in 2015 when the virtual currency silently increased in value from $200 in August last year to Monday's $584.
The South China Morning Post believes that some of the reasons why the Web-based digital currency has suddenly rose to as much as 30 percent was that China's trading volume surged three to five times despite the traders' apparent lack of knowledge on the technology and the worrisome safety of investment.
Aside from that, Bitcoin offers a safer way of transferring funds from one place to another without getting sniffed by Beijing's anti-graft drive, leaving the cryptocurrency the perfect way of hiding dirty money.
Bitcoin's Past with China
Based on the report from Seeking Alpha, Bitcoin was not easily accepted in China when it first attempted to introduce the technology to the country.
In fact, in Dec. 2013, the Central Bank of China banned companies that are linked in any way to Bitcoin, which resulted in a drop in the virtual currency's value from $1,095 to $105.
But it seems as though the Chinese's love for Bitcoin was rekindled last year, mainly because of the lower value.
"It went down for many reasons in 2014; the most important one was that it was too high. These days Chinese activity is driving the ascent in the price of Bitcoin. There is not a lot of other factors going on right now," Wedbush Securities head of technology research Gil Luria told Seeking Alpha.
Now, China is one of the biggest trading centers of Bitcoin, with about 95 percent of all trading done via Chinese exchanges.
Why China Loves Bitcoin
Bitcoin's love affair with China should not come as a surprise since the country is one of the nations with higher vested interest in total control over capital, something that the virtual currency technology offers.
Aside from that, many are also worried about the devaluation of the yuan so much so that investors turn to Bitcoin as the safest bet for their money.
"People are worrying about the PBOC (People's Bank of China) devaluing the yuan," BTCC's Bobby Lee told Reuters. "If you're in China and you're holding onto that yuan, that's a huge risk, so they're buying into hard assets . . . Bitcoin is something that is very easily traded into, so that's what's happening."
Lee also admitted to SCMP that while they do not tolerate illegal acts, Bitcoin provides even corrupt officials with the opportunity to move their dirty money out of the mainland without getting detected.