Bitcoin Soars As China's Creeping Capital Controls Loom

Tyler Durden's picture

Since China devalued the Yuan and surprised the world's carry traders (and central planners) by stirring up FX volatility, the demand for 'paper' gold has begun converging to the demand for physical precious metals. Gold prices are now up over $100 since August 10th, but it is another (easier to 'transport') alternative currency that has soared. Bitcoin has spike post-China-devaluation (since dipping on 'governance' concerns), accelerating from under $200 to almost $300 today, and up 25% since our September 2 explanation why China's capital account crackdown is "great news" for bitcoin.

The demand for alternatives to fiat currencies appears to be soaring:

However, the last week or two suggest, perhaps more importantly, that China easing (and outflows implict from further devaluation) now appears to go straight to Bitcoin.
As Overstock's Chairman noted previously: gold is great, but tough to transport; thus, forcing Chinese into Bitcoin as we previously explained:

As we concluded previously, while China is doing everything in its power to not give the impression that it is panicking, the truth is that it is one viral capital outflow report away from an outright scramble to enforce the most draconian capital controls in its history, which - as every Cypriot and Greek knows by now - is a self-defeating exercise and assures an ever accelerating decline in the currency, which authorities are trying to both keep stable while also devaluing at a pace of their choosing. Said pace never quite works out.

 

So what happens then: well, China's propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households.

 

However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation - it tends to show up quite distinctly on X-rays.

 

Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

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Budnacho's picture

Digital Money....meh...

coinhead's picture
coinhead (not verified) Budnacho Oct 25, 2015 2:02 PM

OMFGAWD IT'S BITCOIN SATOSHI WE LOVE YOU!!!!

Sudden Debt's picture

Just wait untill China decides to hack all bitcoin sites and destroy all wallets.

And people flood into bitcoin because it's easy to buy and easy to sell but remember that the big boys are waiting to dump their worthless coins to the morons once the price is good and it will crash to the floor again.

I do use bitcoin myself but I don't store money in it for myself. I use it to pay a few suppliers who live off the grid and they can't own a official bank account because their funds would be confiscated.

If you are going bankrupt, it's the good way to hide the remainder of your money and milk everything for the last penny so you've got something when you're on your own.

But it's such a risky thing to do. Once you don't have access to a bitcoin terminal in the above case, you're fucked.

And China doesn't even has to block all the bitcoin sites. It can just say to the bank of china for example: Don't allow transactions to bitcoin sites and don't allow deposits from bitcoin sites and you've got a shitload of money floating in thin air that has become worthless.

 

God's picture

OMG I'VE BEEN BIT CONNED!

SILVERGEDDON's picture

UNFORTUNATELY, Bitcoin and other crypto currencies are more volatile than the stock market was in 2008. It has flopped around between zero and several hundred dollars per unit since inception.

So, one day, you can buy nearly an ounce of gold with a bitcoin. Today, about a quarter of an ounce.

Fucking A, that - a 75 % drop in buying power. Sucks if you bought bitcoin at the high water mark, and need to redeem it's value immediately.

So, no, fuck crypto currency and the control it gives to the high priests of electrons.

83_vf_1100_c's picture

OMFGAWD YOU'VE GOT SOME SORT OF GAY ASSED BROMANCE GOING ON THERE.

Maybe I am missing something. I get it and respect the present presumed anonymity of it and ease of crossing borders with large sums of money. I see it as a sign of the desperation people have reached when they are willing to put their fortunes into 1s and 0s on a puter somewhere. Pull a plug and poof, it's gone. Same can be said for most other forms of savings minus lake bottom PMs so maybe it is just a cleanest dirty shirt thing?

TheFutureReset's picture

Have you ever made a transaction with it? It has to be witnessed. The feeling of sending value, actually using something other than fiat, or credit cards for a transaction, without any central permission, no matter where in the world the other party is, instantly. You can't do that with your lake bottom PMs. Maybe a dude in your neighborhood would trade you something for a silver coin, but not likely.

No where does anonymity come into it for 95% of users. You don't have to put a fortune into it, even a few thousand bucks, as much as 1 oz of gold, just in case you are wrong, just in case it is successful and goes to a couple hundred k.

After you buy a little use it. If anything critique from experience is more real and honest.

Americanpegasus's picture

This is a great comment.  Yes, using cryptocurrency for the first time really has to be experienced to be believed.  I remember the first time I sent someone money across the internet with it, and I couldn't believe it - I had just sent real money, instantly, with no one's permission.

crazytechnician's picture

THE FREE MARKET SHOULD ONLY BE ALLOWEDED TO USE METAL AS MONEY , ANYTHING ELSE THE FREE MARKET DECIDES TO CHOOSE FREELY AS MONEY SHOULD BE OUTLAWED AS LONG AS IT'S NOT METAL. ONLY METAL IS MONEY , ONLY METAL IS MONEY , ONLY METAL IS MONEY ..........

coinhead's picture
coinhead (not verified) crazytechnician Oct 25, 2015 3:10 PM

Bitcoin kills borders DEAD!

God's picture

Coinhead, resident globalist.

Bunga Bunga's picture

> FREE MARKET SHOULD ONLY BE ALLOWED ...

That's an oxymoron.

crazytechnician's picture

NO IT IS NOT. BITCOIN IS A SCAM SCAM SCAM , YOU CANNOT EVEN TOUCH IT SO HOW CAN IT BE REAL ???? ITS A CROSS BETWEEN A PONZI SCHEME AND A TULIP BULB , MY OLD GRANNY TOLD ME SO , SO SHE EVEN SAYS THE EARTH IS FLAT AND EVEN HAS A MAP OF IT , SHE LIVES IN HER BASEMENT WAITING FOR ARMAGEDDON , SHE SAYS WHEN WW-III IS OVER WE CAN USE GOLD TO BUY MORE PREPPER FOOD AND BITCOIN WILL BE USELESS BECAUSE OF THE E-M-P THERE WONT BE ANY ELECTRICITY NOT EVEN SUNLIGHT WILL GET THROUGH THE EMP

sleigher's picture

"ONLY METAL IS MONEY"

 

I have been saying this for years and no one will listen.  They usually just walk off.

 

SLAYER!!!!!  

crazytechnician's picture

Yeah only metal is money because it can be backed by a shovel , fuck the free market choosing something different  or better as money .....

White Mountains's picture

You'll find that the vast majority of people who openly disdain BitCoin barely know a thing about BitCoin.

I remember this same thing happening when the Internet was first starting to become popular - people often told me they would never use it.  Same with digital cameras - "meh, I'll only use film".

Well, my friends, BitCoin and the blockchain may very well be a game changer and you're a fool if you dismiss it without knowing in the least much about it except what you regurgitate from all the other clueless peons.

OceanX's picture

"...same thing happening when the Internet was first starting to become popular "

That's absolutely right!  Dr. Gouda, a network professor at UT Austin told his class,  he interviewed with AT&T after getting his PHd. in the 70s. The interviewing manager asked him,  "What would a phone company do with a computer network?"

coinhead's picture
coinhead (not verified) Oct 25, 2015 2:04 PM

Six years into the revolution and the boneheads on ZH still don't understand Bitcoin!  Bitcoin is the tax-haven of the 21st century!

devo's picture

Better not forget your password...

coinhead's picture
coinhead (not verified) devo Oct 25, 2015 2:13 PM

True that, teh we has been doing alot with passwords lately and breaking them with pyrit and cudahashcat and best64.rule.  Getting around 200,000 PMKs/second so far but plan on upgrading.  It is true what they say, humans are not very random!

(cudahashcat even has an option specifically for Bitcoin/Litecoin .dat wallet files)

TahoeBilly2012's picture

One gold bug guru said to move your money overseas, sell everything, buy bitcoin, get to your destination country and buy gold/silver. Pretty damn smart idea!

devo's picture

Yeah that's a good idea. Bitcoin isn't useless. The anonymity angle is overstated, though, along with some other problems.

Bunga Bunga's picture

Bitcoin protocol does not claim anonymity, but services on top like mixers can provide that.

Americanpegasus's picture

Yes, Bitcoin is tracable and public. 

 

This is why the Cryptonote protocol was developed.  Look into Monero.  Using cryptographic ring signatures we finally have the first truly private cryptocurrency, and very few people know about it yet (it just came out in 2014).

Pseudonymous's picture

Keep your password, burn your passport.

To Infinity And Beyond's picture

What is BitCoin backed by again?

15horses1donkey's picture

I am trying to create a coin, a digital currency, backed with a fractional reserve of allocated gold, but it isn't easy, given that I am just your average bloke and on my own. Anyone want to help?

Dick Buttkiss's picture

Forget fractional reserve of gold (which is where modern banking got its start: http://dollarcollapse.com/banking/fractional-reserve-banking-from-goldsm...) and look, for instance, at Uphold — https://uphold.com — with the understanding that it's a centralized system and therefore susceptible to government attack and shutdown.

15horses1donkey's picture

I figure a distributed bitcoin clone is more where it is at. I am going ahead so i'll find out the hard way.

Bitgold.com is rarely mentioned, though it is a viable alternative. I wonder why it isn't more heavily promoted? After all, they have a ratio of 1:1 of allocated gold.

My guess is that bitgold isn't tradable on the typical run of the mill bitcoin exchange...

hence the reason for a bitcoin clone. 

Dick Buttkiss's picture

Mike "Mish" Shedlock is a Bitgold principal.  I suggest you contact him:

http://globaleconomicanalysis.blogspot.com

Michigander's picture

Too late. It already exists. Its called bit gold

crazytechnician's picture

Considering gold is backed by a shovel I would go with bitcoin , math & cryptology & energy vs. shovel ?

commander gruze?'s picture

Bitgold is the stupidest idea ever: take decentralized protocol and load it with whole lot of counterparty risk.

ultraticum's picture

What is the Dollar, Euro, Yen, Ruble, Renminbi, Pound backed by again?

 

. . . other than central bankster hot air fueled by mass ignorance.

White Mountains's picture

Fiat is backed by threat of violence and violence.  Bitcoin is not, it is backed by mathematics.

It's like gravity or the fact the sun and not the earth is the center of universe - you can hate it, refuse to believe it, enact laws against it and imprison or shoot anyone who uses it, but this does not matter because it is still there no matter what anyone attempts to force you to do.

1 + 1 will always equal 2.

Bunga Bunga's picture

fiat = force, bitcoin = consensus

In the end a society which decides for consensus over force is a more advanced civilization.

TheFutureReset's picture

Bitcoin is backed by force too. The force of the free market.

gcjohns1971's picture

What?

Electronic storage devices don't show up on xrays?

News to the author...they do show up.

But after xraying they tend to be blank or otherwise corrupted.

Al Capowned's picture

You can even transport Bitcoin in your brain, Google brain wallets you would not even need a electronic device :)

Prisoners_dilemna's picture

I prefer Electrum for a brain wallet when crossing borders.

Lol.  Capital controls are yesterdays news.

Bunga Bunga's picture

And you are even not required to report your brain wallet when crossing border.

crazytechnician's picture

you can write your encrypted private key on paper , or engrave into a stone , or memorise it ...

TheFutureReset's picture

Come on man, the author didn't say that. He said that bitcoin doesn't show up on xrays. The fact is PM coins are very distinctive, while apps on your phone aren't. You could even email your coins to yourself by sending an encrypted private key, or store them on any number of website accounts like exchanges. Simply login anywhere and send bitcoin. Use an everyday looking debit card charged by bitcoin.

Don't hate tech. Don't be scared of tech. Tech is just a tool. The internet is your only country.

CarpetShag's picture

So how do you buy, hold, and sell bitcoins without getting phucked over by the various intermediaries involved? Who is to be trusted?

blabam's picture

Buy a ledgerwallet for storage, buy Bitcoin directly from multiple online sellers.