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China and the soaring price of Bitcoin

marginalrevolution.com

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Re: China and the soaring price of Bitcoin

#11

Post by stanleydrew »

paulbaumgart wrote: post #6

"If you are long Bitcoin for any appreciable amount of time, it seems you are betting that the Chinese economy will do poorly and capital controls will remain. Then more people will be increasingly desperate to get more money out of the country. Or you may be betting that the Chinese use of Bitcoin to launder money will increase due to the mere spread of the idea, through social contagion." That's kind of silly. Bitc…

None of the other uses really justify the current price though. That's the point.

Clearly the value of a Bitcoin is not $0. He's not claiming that. He's claiming that if you think it is worth more than the current price of $680, then you are essentially betting on Bitcoin's current Chinese swell to continue.

Re: China and the soaring price of Bitcoin

#12

Post by ashray »

gbog wrote: post #8

I asked some colleagues (I am the only foreigner in a 500-sized web company in Beijing) and they were a bit doubful about the money laundry reason invoqued in the article. Sure, there is a huge business in money laundering in China and, for example, contemporary art overvaluation is linked to this financial pressure. But still, this reason is not necessary to explain the hotness of BTC in China, because just summing…

This. I've been trying to explain to people on r/bitcoin and r/bitcoinmarkets that I'm pretty sure that the Chinese have well polished ways and means of getting money out of China, in spite of capital controls.

When the mafia figures out bitcoin is a good way to do this things will start looking quite different.

Re: China and the soaring price of Bitcoin

#13

Post by ashray »

stanleydrew wrote: post #11
paulbaumgart wrote: post #6

"If you are long Bitcoin for any appreciable amount of time, it seems you are betting that the Chinese economy will do poorly and capital controls will remain. Then more people will be increasingly desperate to get more money out of the country. Or you may be betting that the Chinese use of Bitcoin to launder money will increase due to the mere spread of the idea, through social contagion." That's kind of silly. Bitc…

None of the other uses really justify the current price though. That's the point. Clearly the value of a Bitcoin is not $0. He's not claiming that. He's claiming that if you think it is worth more than the current price of $680, then you are essentially betting on Bitcoin's current Chinese swell to continue.

Markets tend to price in future usage. Are there indications that bitcoins will be extremely valuable in the future ? Yes.

Is there progress being made every day with bitcoins ? Yes.

Is there global potential for bitcoin to be used as some form of currency ? Yes. (it is already being used in small amounts in several places)

Markets tend to price these things in. Investor sentiment is optimistic. Bitcoins current position certainly doesn't justify this price. But the market has priced in the future.

Re: China and the soaring price of Bitcoin

#14

Post by ashray »

ericmsimons wrote: post #5

Okay, so with all of the talk about how China is buying more bitcoin than anyone else, why is the transaction volume not increasing accordingly? You can see it on the coinbase graph - https://coinbase.com/charts - it's basically seen the same volume since April, with the exception of July.

That's actually an interesting point. It's possible that people on BTC China are not in fact moving their bitcoins out of the exchange and selling them on another exchange to launder money. They're possibly holding bitcoins in their BTC China wallets. Those transactions will not influence the over all bitcoin transaction volume.

Furthermore, per exchange volumes have been insanely high over the past few days. See: http://bitcoincharts.com/markets/

What you basically pointed out points towards the premise of the article being false. It's not money laundering, it's something else.

Re: China and the soaring price of Bitcoin

#15

Post by crystaln »

ashray wrote: post #12
gbog wrote: post #8

I asked some colleagues (I am the only foreigner in a 500-sized web company in Beijing) and they were a bit doubful about the money laundry reason invoqued in the article. Sure, there is a huge business in money laundering in China and, for example, contemporary art overvaluation is linked to this financial pressure. But still, this reason is not necessary to explain the hotness of BTC in China, because just summing…

This. I've been trying to explain to people on r/bitcoin and r/bitcoinmarkets that I'm pretty sure that the Chinese have well polished ways and means of getting money out of China, in spite of capital controls. When the mafia figures out bitcoin is a good way to do this things will start looking quite different.

> I'm pretty sure that the Chinese have well polished ways and means of getting money out of China

What makes you "pretty sure"?

Certainly some Chinese have sophisticated methods of exiting money, through overseas corporations and the like. However most Chinese do not, and there are many, many financially unsophisticated rich Chinese.

The evidence is pretty clear that you are wrong. The 20-30% premium Chinese pay for bitcoin, and the inflated Chinese real estate market, both indicate the difficulty. Besides, I lived in China and faced this issue. It is not easy.

Further, Chinese regulators are very smart. The capital controls are there for a reason, and they are effective and enforced.

Re: China and the soaring price of Bitcoin

#16

Post by jackgavigan »

paulbaumgart wrote: post #9
IgorPartola wrote: post #2

So the question is whether BTC jumping from 200 USD to 600 USD in under two weeks is a bubble or if BTC finally found its calling in China.

http://www.reddit.com/r/Bitcoin/comments/1q41wq/the_bitcoin_...

That's a very nice little application of behavioural finance to Bitcoin.

Re: China and the soaring price of Bitcoin

#17

Post by stanleydrew »

ashray wrote: post #13
stanleydrew wrote: post #11

Earlier quoted context omitted.

None of the other uses really justify the current price though. That's the point. Clearly the value of a Bitcoin is not $0. He's not claiming that. He's claiming that if you think it is worth more than the current price of $680, then you are essentially betting on Bitcoin's current Chinese swell to continue.

Markets tend to price in future usage. Are there indications that bitcoins will be extremely valuable in the future ? Yes. Is there progress being made every day with bitcoins ? Yes. Is there global potential for bitcoin to be used as some form of currency ? Yes. (it is already being used in small amounts in several places) Markets tend to price these things in. Investor sentiment is optimistic. Bitcoins current posi…

Rational and stable markets will tend to price in future usage. But even those suffer bubbles every once in awhile.

But that's beside the point. The argument being made is that the future usage being priced into Bitcoin in the current craze depends on China not doing things that would make it less useful to hold Bitcoin.

Re: China and the soaring price of Bitcoin

#18

Post by ashray »

crystaln wrote: post #15
ashray wrote: post #12

Earlier quoted context omitted.

This. I've been trying to explain to people on r/bitcoin and r/bitcoinmarkets that I'm pretty sure that the Chinese have well polished ways and means of getting money out of China, in spite of capital controls. When the mafia figures out bitcoin is a good way to do this things will start looking quite different.

> I'm pretty sure that the Chinese have well polished ways and means of getting money out of China What makes you "pretty sure"? Certainly some Chinese have sophisticated methods of exiting money, through overseas corporations and the like. However most Chinese do not, and there are many, many financially unsophisticated rich Chinese. The evidence is pretty clear that you are wrong. The 20-30% premium Chinese pay for…

If the Chinese regulators are so smart and capital controls are so tight, then how would the Chinese get money out via bitcoin ?

What about the entire paper trail:

a) from bank deposits/tenpay deposits to BTC China where they convert to bitcoins

b) and then allegedly sell on a foreign exchange (bitstamp, maybe ?)

c) following which they withdraw to an overseas bank account ?

If we're talking about illegal money (not part of the banking system) then again BTC China isn't reportedly accepting any cash. So how would that work ?

The evidence isn't really that clear. What we see is the Chinese buying a lot of bitcoins.

There's no evidence that they then moved those bitcoins to a foreign exchange, cashed them out, and then moved that cash to an overseas bank account. Do you have anything at all that supports this ? Not even the bitcoin network transaction volume is in agreement with this kind of movement of coins.

Re: China and the soaring price of Bitcoin

#19

Post by oleganza »

ericmsimons wrote: post #5

Okay, so with all of the talk about how China is buying more bitcoin than anyone else, why is the transaction volume not increasing accordingly? You can see it on the coinbase graph - https://coinbase.com/charts - it's basically seen the same volume since April, with the exception of July.

Bitcoins, like any money, is used to satisfy a reservation demand, that is, a demand for holding money for future use. "Currency" appears only when you find a closely connected group of investors in this money that find it useful to trade right in this money. "Circulation" of money happens as an effect of a bunch of investors finding each other in their daily market cooperation.

Today Bitcoin is in hands of fewer than 0.001% of all people in the world and those people are pretty scattered across the globe. This does not diminish utility as "store of value", but it does not create a lot of trade. Once, say, 10% of Shanghai is holding Bitcoin, you will suddenly see a spike in trade in Bitcoin itself (as it will be cheaper than moving cash or using credit cards).

Re: China and the soaring price of Bitcoin

#20

Post by ra »

ericmsimons wrote: post #5

Okay, so with all of the talk about how China is buying more bitcoin than anyone else, why is the transaction volume not increasing accordingly? You can see it on the coinbase graph - https://coinbase.com/charts - it's basically seen the same volume since April, with the exception of July.

Check this out, see BTC are going to China (and other countries) in real time.... it's all buying: http://fiatleak.com/
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