Were you watching it? I was watching it all day long. Like Clark Kent ready to tear off his suit and turn into Superman, Bitcoin price was bursting at the seams to show what it could do but kept running into major resistance at about $690.
Finally, the dam burst and Bitcoin conquered its temporary price barrier to reach over $700 for the first time since the first day of Summer. The reason why is the usual suspect.
The China Syndrome
According to Bloomberg, the Chinese yuan traded in Shanghai’s spot market, fell 1.6 percent so far this month to 6.7808 a Dollar. That’s the most since the People’s Bank of China weakened its exchange rate by 4.4 percent in three days in August 2015. As we all know, when the Yuan/Renminbi drops, China moves in on Bitcoin, and Friday was no different. Like a leak in a dam, there was too much energy to keep Bitcoin at bay this time, and Bitcoin peaked at almost $705 on BitcoinAverage.com.
Michael Every, head of financial markets research at Rabobank Group in Hong Kong, says:
“We keep hearing that there’s no basis for it to decline, and it keeps declining. If they don’t want it to decline, then raise interest rates or intervene. Otherwise, markets will decide on the value.”
The U.S. Dollar strengthening over the last month was also a factor along with rumours of a Federal Reserve rate hike coming soon.
What may slow this Chinese economic descent, is capital inflows based on the IMF, making the Yuan a reserve currency this month. This brought the Chinese global payments share to over 2 percent. The government is expected to step in and stop the bleeding, according to a Bloomberg survey of 21 foreign-exchange traders and analysts.
The last time Bitcoin was over $700 was the first day of summer, June 20, when daily trading passed $425 mln, a record for 2016. Information on Friday’s Bitcoin trading was not available at the time of printing, but according to Blockchain.info, Wednesday’s trading set a year-to-date transactional volume mark of well over 325k Bitcoin transactions. An average day usually has between 220 to 240k transactions. It is safe to assume that Friday matched or exceeded Wednesday’s total volume to generate this new level of value.