Over the past year, investment money has been flowing out of China’s markets at a record pace, creating great instability in not just China, but globally. The largely state-controlled economy has seen new measures to stem the tide, and massive capital controls may be on the horizon, creating a great opportunity for Bitcoin to peak as it did in 2013, according to ZeroHedge.
Chinese capital controls
Money has been leaving China’s economy for a long time, and the recent currency devaluation is only a symptom of that, not the cause. Investing in real estate is always a staple of any wise investor’s portfolio, and the Chinese have done so. CNN reports that over the last 12 months, more than US$30 billion has left China for U.S. real estate, accounting for almost 25% of all foreign investment in that sector.
The Chinese are starting to "think money in the bank is not safe -- it won't gain any value if the renminbi is still devaluing," said David Ji of Knight Frank, an international real estate agency. "So people will look to real estate as a more solid investment channel.”
The Chinese government has grown their gold reserves, but it is less attractive to the individual investor, as it leaves quite a trail coming and going for those looking to diversify and avoid the local currency’s trouble and monitoring. Moving large sums of money out of the country, without government oversight, via “underground banks” has become very popular, but more and more dangerous, as The State cracks down. ZeroHedge exposes the latest in this situation:
“Chinese officials have intensified a crackdown on what are known in China as underground banks, which Chinese nationals often use to shift money in and out of the country despite tight capital controls. Meng Qingfeng, vice minister of public security, said late in August that those money-transfer agents remained ‘rampant’ despite repeated crackdowns on them, according to the official Xinhua News Agency. Mr. Meng also urged police around the country to better coordinate with the central bank in the campaign, which will run through the end of November.”
Gold, real estate, and bitcoin are an investor’s best friend
Sounds like a perfect spot for bitcoin to come to the rescue, no?
Bitcoin’s unique ability to move money globally in seconds seems like a natural fit for any financial market in need. With Bitcoin’s overall market value at a mere US$3.3 billion, a fraction of that investment into U.S. real estate would easily double bitcoin values.
A smart Chinese investor would look into the history of Bitcoin in 2013 when it was initially introduced to the Chinese market. Values jumped almost tenfold within one-quarter, in conjunction with Mt. Gox’s market accounting issues. With over US$22 trillion on deposit, the Chinese market making even a small shift towards bitcoin could make 2013 look like a mere token of their esteem.
Bitcoin has demonstrated relative stability in 2015, with USD values staying between US$200-300 virtually the entire year. The Bitcoin halving of production next summer should net gains by the end 2016, but a block of Chinese national investment would have a large effect on values for speculators and investors.
It would appear the Chinese market has a lot of money to move out and nothing moves large sums of money overseas faster or easier than Bitcoin. Either way, this opportunity looks custom-made for the Chinese to jump back into Bitcoin, which could propel price values over the next year.