The Reason For Bitcoin's Recent 60% Surge Revealed

Tyler Durden's picture

It was precisely two months ago, on September 2nd, when we explained that as a result of China's recent currency devaluation, in order to mitigate the inevitable capital outflows that such an FX move would unleash, China was "scrambling to enforce capital controls" in order to prevent the exit of hot (and not so hot) money from China's economy.

We then said the following to explain why "this is great news for bitcoin":

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.

At the time of this forecast, the price of bitcoin was highlighted with the red arrow.

 

And while we were confident it was indeed Chinese capital "mobility" using the bitcoin channel that was the impetus behind the nearly 60% surge in the price of the digital currency in past two months to fresh 2015 highs, moments ago we got the closest thing to a confirmation when Bitcoin Magazine reported that "China is leading the charge, with the price trading anywhere from $10-$15 above the rates on U.S. and European exchanges."

Bitcoin Magazine further adds that "China is experiencing unprecedented amounts of growth. On October 30th, Jack C. Liu, the Head of International at OKCoin, said, in a tweet, that it had been the “busiest day of the year @OKCoinBTC as #Bitcoin trades to 2015 high of $344. No clawbacks on futures, no downtime. Great day for us & industry.”"

Two days later, he went on to reveal that OkCoin had seen incredible demand for accounts on the exchange:

And here is the validation that, just as predicted here two months ago, bitcoin has become the go-to asset class for millions of Chinese savers seeking to quietly and under the radar transfer funds from point A to point B, whatever that may be, in the process circumventing the recently expanded governmental capital controls:

While he didn’t provide any concrete numbers, he did comment last week on what was driving the adoption. “Some Chinese traders are expressing a view on the CNY exchange rate after the last devaluation and you have interest by mainland speculators to move to other assets after the stock market fallout,” he explained in an interview with Bitcoin Magazine.

Which again brings us back to our conclusion from two months ago:

... 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.

As of this moment, the total value of bitcoin is up from the $3 billion two months ago to a little over $5 billion. That means the ratio of Chinese deposits (at around $22 trillion) to bitcoin, is down to a far more "conservative" 4,400x.

And now, again, imagine what could happen if these same Chinese depositors realize they have been lied about the non-performing loans "backing" their deposits and that instead of the official 1.5% bad debt ratio, the real number is really far greater, somewhere in the 20% ballpark as we will show shortly, suggesting major deposit impairments are no longer the stuff of Cypriot nightmares but just the thing hundreds of millions of Chinese depositors have to look forward to, and that they have just two possible choices to avoid said impairment: reallocating their savings into bitcoin or, of course, gold.

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knukles's picture

Get screwed on stocks so putchur money somewhere safe.
Got it
What's Chinee for 201(k)?

Roving reporter's picture

BTC will make new highs, some will get on board and some will wish they had...

Ignatius's picture

Gold and silver are being held back while BTC seems able to float.

38BWD22's picture

 

 

Hold gold.

HODL Bitcoin.

(95% of the above in gold)

38BWD22's picture

 

 

"TAFKADCRB" blesses your 50/50, because you contributed to my knowledge way back when (and you know a lot about BTC).

;)

FinalEvent's picture

It's a ponzi. Don't fall for it.

Wait for it to become WRC and then convert.

Wow72's picture

They will LET you invest in bitcoin, not gold/silver.   The fake stuff....we are not good enough for the real stuff, only the central banks are good enough for gold/silver.

manofthenorth's picture

I am enjoying the bargain prices in PMs. I was affraid that I had run out of time to buy cheap silver back in 2010 and stopped buying untill late 2013. I have been happily loading the boat up. I will miss double digit silver when its gone.

dark pools of soros's picture

what you guys run out of powder???   even if gold went up you'd never sell anyway just like when it was in the $1800's and ya'll sat on your asses

 

remember BTC is suppose to be dead right??  wake the fuck up or shut up

 

 

Precious Hawk's picture

And when there is a blackout, grid down, you are going to glad you had your bitcoin folder. When the banks close and they take down the internet, you will bless you bitcoins.  When the grid comes back and the entire bitcoin platform is wiped, you will be rich I tell you. RICH.

sessinpo's picture

if the grid goes down, your bitcoins will be stuck in your little folder with no where to go.

L_Estasi_dell_Oro's picture

Yes! ;-)

(Why not collect all three?)  

Precious Hawk's picture

The Chinese are getting their corrupt gains out of the country. What happens when the Chinese government starts checking tax returns and property holdings abroad?  Do you understand that the USA is one of very few countries that taxes its citizens on money earned abroad. You cannot escape FATCA.  The Chinese WILL chase this money, probably through the bitcoin paper trail.  Then watch the Vancouver property price index (and the bitcoin value). PH

MonetaryDigitalis's picture

And imagine how much more effective Bitcoin is when you silence the blockchain as they say at silentvault.com or digitalcash.to

SgtShaftoe's picture

That's interesting, though I'd like to see more detail. After the epic fail that was MT. Gox, storing any BTC currency with an exchange is risky business. For the technology inclined bitcoin is pretty awesome. This is one area that the free market is staying miles ahead of government surveillance. We'll see how much meddling they can do with the stuff they got from dread pirate roberts.

Maybe they've already used it, I don't know.

MonetaryDigitalis's picture

Blair Masters of JP Morgan fame thinks bitcoin is great for bankers.

astitchintime's picture

hmmm, Blair Masters?

Is she kin to the imfamous BLYTHE MASTERS of JP Morgan fame ??

/snark!

gotta love the newbies ;))

fel.temp.reparatio's picture

List of Bitcoin heists from Bitcointalk.org (up to 2012-13)

Further reading via Forbes here and here 

Paveway IV's picture

This looks like a good time to start my Bitcoin Volatility Index triple-leveraged funds. May I reccomend investing at least 60% of your 401k in it? This isn't investment advice - but you're going to be frickin' RICH. Trust me.

xrxs's picture

GBTC (Global Bitcoin Trust ETF) is a nice way to get some exposure.  I've got some in tax advantaged accounts.  Been a nice ride so far, had been accumulating all summer.  Also own some with Coinbase (coinbase.com) -- it's a pretty easy way to buy BTC directly, and they're based in San Frani.  Strapped in and ready for the G forces up.

shitco.in's picture

BTC triple volatility? 

You can trade well in excess of 10x-20x leverage in btc world on Chinese exchanges. 

Seasmoke's picture

Forget Gold. Welcome to the 21st Century Yellowman. 

Dragon HAwk's picture

We BitCoined some folks....

SgtShaftoe's picture

It's just a currency. Trade it if you want, or not whatever. It's certainly safer than USD, JPY or CNY or even the damn CHF. It can't be printed. It's not gold, but a wrench isn't exactly a very good hammer either no matter how many times you try it, and I have.

commander gruze?'s picture

Well, it is not JUST a currency. Like the Internet in '92 was known to do little more than email, but then we learned it's much more than just email.

Bitcoin is a communication protocol and ownership transfer network capable of registering transactions with the following details: time, sender(s), recipient(s), amount, arbitrary metadata, conditions under which the transaction is executed. This looks modest, but in reality it allows building complex ownership transfer rules in form of smart contracts - ones that care not about jurisdiction or national borders. With metadata component one can treat units of bitcoin as stocks or bonds, with the irrevocable timestamping comes the power of registering assets like home ownership or notarizing documents with no third party notary public.

In reality what we witness being born is not JUST a currency, but in fact a whole new industry of programmable money for which BTC (the unit of account on Bitcoin network) is a carrier.

Precious Hawk's picture

So you can't print bitcoins? Tell me again how they come into existence?  Mining you say?  So I was mining some documents on my printer yesterday.  Oh that's called printing is it?  Tell me the difference.  You computer works through some mumbo jumbo coding (that somebody developed!) and out pops a bitcoin (a number).  Wow, this I can trust.  The whole thing is one step away from lunacy, but the government will not attack it because it wants you to trust digital money systems - until they don't.

Bunga Bunga's picture

Was aired yesterday in the Netherlands, mainstream TV, prime time:   https://www.youtube.com/watch?v=8zKuoqZLyKg

fudge's picture

Any time something is on prime time I get a little suspicious  -_-

RopeADope's picture

Well played, sirs.

Haole's picture

Whatever...

BTC, BTChez

ghostzapper's picture

Agree with the analysis of potential Chinese impact.

I'm the first to acknowledge the "running correction" befuddled myself and others with its length and multiple head fakes, but there are a few TA reasons to think the bear is over. A new bull could easily last several months or even 1-3 years.

Even a CNBC "expert" should be able to determine what the last 9/10 up weeks on sequentially rising volume means vis a vis accumulation/distribution.

Lower volume pullbacks on the weekly to key levels will be potentially crucial if it rockets higher from there.

Yen Cross's picture

 Rising volume? You need to up your meds.

herkomilchen's picture

I think you've been in the casino too long.  Real markets don't gyrate to the fluctuations of overfunded manipulators seeing animal shapes in clouds.

Back when gold was widely used as money, it didn't form head-and-shoulders configurations and all that crap.

Likewise, bitcoin is a real market.  No one can manipulate its value upward or downward regardless of what they see on a technical chart.  People just buy it when they need it and sell it when they don't and its price moves up and down accordingly.  Simple as that.

messystateofaffairs's picture

Overfunded manipulators would have a vested interest in the failure of crytocurrency specie displacing their own central bank fiat. If I were them I would buy and hoard btc over time in small increments and dump it en mass at strategic times to dampen any rise. Monetary "magicians" and their govt sympathizers obviously don't want free market specie to trump slave system fiat as money. They will use price manipulation,  specious economic rationalizations,  propaganda smear campaigns, and force of law to suppress any specie challenge to their fiat.

Farqued Up's picture

Hoard over time? Impossible, any regime change will raid it or the Fed will raid it. But, why bother with subtlety when they can counterfeit it as they do other currencies?

Kirk2NCC1701's picture

I plan to sell mine when I hit the Break-Even Event (BEE).  Soon, I hope.

Ditto for my other "Store Of Value", where the whole 'Store' sunk down to the basement, like some kind of a sinkhole.  Or should I buy more of it, while it's cheap, to offset the total costs?  The more I buy, the more I save, right?

Ah, the joys of being a Contrarian.

(p.s. I'm not putting in 'Sarc-Tags-for-Dummies')

Anopheles's picture

Quit while you're ahead.   The art of "investing" is knowing when to SELL. 

sleigher's picture

Sell low buy high.  Only for the timid...

Bunga Bunga's picture

Buy bank stocks, generational buy ... just kidding ;)

spanish inquisition's picture

Electronic block chain beanie babies?