Opinion: Chinese investors are loading up on bitcoin, which may help explain the cryptocurrency’s dazzling rise

Opinion: Chinese investors are loading up on bitcoin, which may help explain the cryptocurrency’s dazzling rise


Explaining the dazzling rise of bitcoin has always been a fool's errand. Scarcity (bitcoins are limited by design to 21 million), crazy gambling, utility, inflation coverage, global market acceptance, voodoo. All of these possibilities and more have been cited for cryptocurrency's ability to generate thousands of new millionaires every week.

Here's another theory: China's slowing economy and its crackdown on the rich are behind bitcoin's recent surge.

Fortunes are flowing Porcelainand why not use bitcoin BTH24 like the funnel? It's easy to buy if you know how the system works: bitcoin is technically illegal in China. It is also becoming a global brand, and we all know that Chinese investors and consumers love global brands. China is the largest market for Porsche and one of the largest for Ferrari, for example.

Bitcoin has been booming. On March 5, it reached $73,800, surpassing its 2021 record of $69,000. It was conceived in 2008 and, in its beginnings, it could be obtained for a penny. The coins are very volatile, but the overall trajectory has been up, up, up after the cryptocurrency market crashed in 2022.

In December, one bitcoin was worth $42,000. The peak price represents a 75 percent increase in just three months, although it has fallen about 15 percent in recent days. Still, bitcoin has been one of the world's top-performing assets over the past year. FOMO (fear of missing out) has certainly attracted hesitant investors and outright speculators to the market, even though many, perhaps most, have no idea how cryptocurrencies work or that they may not be as democratic, decentralized, anonymous , safe and useful as advertised. A few years ago.

For any crypto skeptics or those who grew up thinking that a real currency was a piece of paper decorated with a dead man's face, the rise of bitcoin and its rivals is a mystery.

Gallander and Stadelamann: Contra Guys: Bitcoin has real value, assuming this condition is met

There was a curious theory that legal currencies were essentially a political construct and that gold-backed currencies disappeared long ago. Money is generally not considered money unless it is a medium of exchange, a store of value, a unit of accounting, and governments accept it for taxes so they can pay their suppliers and employees. You can't pay your taxes with bitcoin or any of its rivals. Fiat currencies would not be worth the paper they are printed on without the government's insistence that they be used to pay tax obligations. That El Salvador and the Central African Republic adopted bitcoin as legal tender hardly inspired confidence.

At times, the sheer nonsense led to more skepticism about the rise of cryptocurrencies. Take for example the launch a couple of years ago of a non-fungible cannabis token that one tech publication earnestly described as “a new community existing at the heady intersection of cannabis, cryptocurrencies, and the Metaverse.”

The real-world benefits of cryptocurrencies remain minuscule or non-existent, although criminals love to use the currency to launder money. Cryptocurrencies are often stolen and cases of fraud and deception are sometimes spectacular. Sam Bankman-Fried's FTX cryptocurrency exchange and its sister company Alameda Research collapsed in 2022 with a $9 billion hole in FTX's balance sheet. He is awaiting criminal sentencing.

Still, bitcoin and other major digital currencies have soared to dizzying heights in recent months. Its rise cannot be explained solely by investors' probably mistaken belief that cryptocurrencies will soon make the traditional financial system redundant or by the recent regulatory approval in the United States of bitcoin exchange-traded funds. Fear and hatred in China appear to be driving the rally.

The Chinese economy has slowed and a collapse of the highly indebted housing market may be imminent. This week, Chinese real estate giant Evergrande and its founder were charged with a $78 billion fraud, and investors are bailing out other developers. At the same time, a disproportionate number of wealthy executives are disappearing or ending up in prison.

The list of missing has grown since 2021, when Chinese President Xi Jinping called for “common prosperity,” widely seen as a warning to tycoons to slow down their greed marathons or face the consequences. Billionaire Alibaba founder Jack Ma inexplicably disappeared for many months in 2020 and 2021. Billionaire Chinese-Canadian businessman Xiao Jianhua was taken from a luxury hotel in Hong Kong, disappeared for several years, and, in 2022, was sentenced to life. 13 years in prison for fraud. .

The Guardian recently reported that the crackdown on Chinese billionaires, slow growth and falling stock markets are causing a huge outflow of funds from China. In the first half of 2023, there was a deficit of $19.5 billion in China's balance of payments, an indicator of capital flight. The real figure may be many times higher. Mainland Chinese are snapping up luxury condominiums in large numbers in Singapore and elsewhere, and immigration consultants say many thousands of wealthy Chinese families are leaving the country.

It is difficult to prove that wealthy Chinese investors are using bitcoins to hedge their wealth, although there are signs. Chinese cryptocurrency investors earned $1.15 billion last year, according to New York blockchain research firm Chainalysis, which also said Chinese cryptocurrency transactions were increasing. There is no doubt that his bitcoin purchases added momentum to the price. The question is what will happen to bitcoin when they bring their money home.


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