Bitcoin Soars Above $1,600 On Relentless Japanese Buying Frenzy

May 4, 2017 11:41 AM

Four days ago we reported that bitcoin has surged above $1,400, hitting a new lifetime high, while rising above $1,500 on certain Chinese exchanges. Since then, bitcoin's latest exponential rise has only accelerated, and moments ago the price of the cryptocurrency surged as high as $1,600 on the Coinbase exchange, rising as high as $1,655 on the troubled Bitfinex exchange.

What is prompting this relentless surge in Bitcoin?

Several things.

The first, as we noted on Monday, was "plain old supply and demand." While unclear if the result of a regulatory crackdown seen recently in Chinese-based exchanges, Hong-Kong based Bitfinex and some other crypto exchanges in the industry "have been dealing with liquidity and withdrawal issues the past few weeks." Specifically, Bitfinex had trouble processing transactions after the Taiwanese banks that handle them started blocking requests. That’s part of a trend where some banks are pulling out of sectors they deem risky. A representative from the exchange had confirmed to the WSJ that the inability of investors to withdraw bitcoin is affecting the price. Perversely, instead of forcing the price of bitcoin lower, the liquidity squeeze was forcing traders to offer higher bids to get their bitcoin out, which is subsequently forcing the price up.

Then, there is Japan.

As we observed previously, according to Japan's Nikkei more than 10 Japanese companies are launching exchanges for bitcoin and other virtual currencies, with an eye to tap growing demand after legal changes that make such trades cheaper and easier in the country. As discussed previously, starting July, Japan's consumption tax will no longer apply to purchases of virtual currencies. Exchanges in Japan have also been required since April to obtain a special license, which has requirements for finances and asset management structures, from the Finance Ministry.

One example: SBI Holdings has set up SBI Virtual Currencies, an exchange between the yen and cryptocurrencies like bitcoin and that of the Ethereum platform. The GMO Internet group is also establishing its own company, with plans to increase the number of digital currencies it trades based on demand. Kabu.com Securities and foreign exchange trader Money Partners Group plan to enter the field as well.

While the Bitfinex issue my be localized, Japan's demand has been clearly confirmed by capital flows on various exchanges. Alex Sunnarborg, a CoinDesk research analyst, pointed to a spike in global trading volume, especially from Japan and its bitFlyer bitcoin exchange.

As the chart below shows, Japan’s currency JPY has been responsible for more than half, or 52.35% of bitcoin trading volume in the recent 24 hours, followed by the USD at 28.12%, CNY 8.23%, EUR 4.92% and KRW 2.9%. The rise in value shows a surge in trading activity, nearly $700 million in bitcoin according to CoinMarketCap. The trading is markedly led by Japanese markets

As Cryptocoinsnews adds, the Yen-bitcoin trading is all the more notable given that Japan continues to impose an 8% consumption rate tax on purchasing bitcoin through exchanges. Toward the end of 2016, Japanese officials took the call to formally end this tax tariff, a move that will go into effect in July this year.

Finally, there is the recent spike in demand for all other alt-coins.

As we further noted on Monday, there has been ongoing investor interest in other cryptocurrencies such as Ethereum which today also reached record highs, rising above $90, further boosting demand, according to Sunnarborg. These alternative digital currencies are usually bought and sold with bitcoin, requiring traders to buy bitcoin.

The Ripple network is experiencing adoption by a large number of financial institutions to process domestic and cross-border payments. This, in turn, has sparked interest in Ripple’s digital currency, which has had an impressive rally in the last two months, increasing from $0.0054 on March 1 to $0.054 on May 1.

We summarized the ongoing bitcoin frenzy as follows on Monday: "just as the Chinese bubble frenzy in bitcoin is fading, it may be replaced with a new one, in which thousands of Mrs. Watanabe traders shift their attention away from the FX market and toward digital currencies" and added that "If the transition is seamless, there is no telling just how far this particular bubble can grow."

Four days later and $200 dollar higher, we are observing first hand how accurate this predication may have been, although like on Monday, we have no way of telling how long this particular mania phase will last.

Bitcoin could hit $100,000 in 10 years, says the analyst who correctly called its $2,000 price

• Bitcoin could make up 10 percent of the $5 trillion average daily volume in the foreign exchange market in 10 years, according to Saxo Bank analyst Kay Van-Petersen.
• Its market capitalization could grow to $1.75 trillion which would make each bitcoin worth $100,000.

31 May 2017

Bitcoin's price has the potential to hit over $100,000 in 10 years, which would mark a 3,483 percent rise from its recent record high, an analyst who correctly predicted the cryptocurrency's rally this year told CNBC on Tuesday.

In December, Saxo Bank published its annual report called "Outrageous Predictions" with one of the forecasts calling for bitcoin to hit $2,000 in 2017. At the time the note was published, bitcoin was trading at around $754, so the target price represented a 165 percent rise. Bitcoin hit $2,000 on May 20.

But now, Kay Van-Petersen, the analyst behind the call, is looking long term and sees a big rise ahead for bitcoin.


How will bitcoin hit $100,000

Here's how he came up with his price target in 10 years.

Van-Petersen is assuming cryptocurrencies in general – not just bitcoin – will account for 10 percent of the average daily volumes (ADV) of fiat currency trade in 10 years. Foreign exchange ADV currently stands at just over $5 trillion, according to the Bank for International Settlements.

Ten percent of $5 trillion is $500 billion. This is the ADV that cryptocurrencies could have. Bitcoin will account for 35 percent of that market share, which would that $175 billion of the $500 billion figure, he said. This would mean that $175 billion worth of bitcoin would be traded every day

Also, Van-Petersen then implies that bitcoin's market capitalization would be ten times the average daily volume, giving a figure of $1.75 trillion for the market cap. The current figure is around $37.8 billion, according to data from industry website CoinDesk.

Bitcoin has a limited supply of 21 million which is expected to be reached by the year 2140. In 10 years, the analyst thinks that there will be 17 million bitcoin in circulation, up from the current 16.3 million figure.

If the potential 17 million of bitcoins in supply is divided by the $1.75 trillion market cap estimate, then each bitcoin would be worth just over $100,000.


Bitcoin 'not a fad'

Van-Petersen – who owns bitcoin – emphasizes that this is a rough calculation but that his growth predictions could be "conservative" given that in the year 2013 alone, bitcoin's price grew over 5,000 percent. The analyst said that cryptocurrencies will survive in the long run.

"This is not a fad, cryptocurrencies are here to stay," Van-Petersen told CNBC in a phone interview.

"There will emerge two to three main ones. Bitcoin will be one of those. And the reason is the first-mover advantage, the scale and the pioneering."


Bitcoin's bad reputation

The bitcoin industry has had its fair share of problems and reputational damage. The digital currency has often had an image of being used for illegal means such as buying drugs online. The collapse of Mt.Gox in 2014, once the world's largest bitcoin exchange, is still fresh in the minds of users. Some members of the exchange are still waiting for compensation.

More recent issues include some exchanges not allowing people to withdraw their money in fiat currency. On top of this, the view of bitcoin as a currency for criminals is still prevalent after the major WannaCry ransomware cyberattack saw hackers lock peoples' files and ask for bitcoin in exchange to unlock them.

Still, Van-Petersen says that the industry is still extremely young and big improvements will come. A few factors will boost bitcoin adoption including better wallets, easier methods to buy the digital currency, use of it for money transfers in areas like remittances, as well as citizens of countries with volatile economies and currencies buying it.

"Volumes are going up, volatility is going down. A lot of people talk about the volatility, but if you are in Zimbabwe or Venezuela, this volatility is nothing. This is the interesting thing to me. I think in the West, a lot of people view it is as speculative, but emerging markets will get it, their needs will be different," Van-Petersen added.

While Van-Petersen is offering one way to value bitcoin in the future, others say that there are other factors to take into consideration.

"It's one way of slicing the pie to try and predict future prices which always relies on a lot of assumptions," Charlie Hayter, CEO of industry website CryptoCompare, told CNBC by email.

"Equating volumes to price value is one method of attempting a valuation, but it doesn't take into account the fundamentals of the ecosystem."

The fundamentals of what bitcoin is capable of from a technical point of view and how regulation is molded around its use will determine its value too, Hayter added.

Bitcoin bulls runs wild as cryptocurrency surges above $3000

June 11, 2017

Bitcoin traded above $3,000 for the first time on Sunday, continuing this year's massive surge and helped by increased demand from Asia-based investors.


After trading in a range for the last week, bitcoin climbed to an all-time high Sunday of $3,012.05, according to CoinDesk.

On Chinese exchanges such as BTCC, the currency traded about $40 to $60 above that price.

The digital currency has had a stellar year, rising by more than 200 percent and easily outperforming stock market benchmarks like the S&P 500 Index and the Nasdaq composite in 2017. The cryptocurrency has now more than tripled in value since trading at $968 on Dec. 31, and has gained nearly 30 percent in June alone.

Brian Kelly, CEO and founder of BKCM and a CNBC contributor, told CNBC this week that the cryptocurrency was "in the first years of what is likely to be a multi-year bull market. Of course there will be corrections and even crashes along the way, but bitcoin is here to stay."

A contributing factor to bitcoin's recent surge is growing demand from Asia. In addition to the China factor, Japanese interest has risen ever since the government approved bitcoin as a legal payment method in April.

Investors also plowed more money into the currency after Minneapolis Federal Reserve President Neel Kashkari commented on the blockchain technology behind bitcoin, saying it "has more potential than bitcoin itself."

This high school dropout who invested in bitcoin at $12 is now a millionaire at 18

• Erik Finman began investing in bitcoin in 2011, when it was just $12 a share.
• Through selling companies and other investments, he now has 403 bitcoins worth more than $1 million.

June 20, 2017

Erik Finman made a bet with his parents that if he turned 18 and was a millionaire, they wouldn't force him to go to college. Thanks to his savvy investments in bitcoin and the current all-time high valuation, he won't have to get his degree.

"I can proudly say I made it, and I'm not going to college," Finman said.

He currently owns 403 bitcoins, which at the current $2,700 a coin puts his bitcoin value at $1.09 million. He also has smaller investments in other cryptocurrencies, including litecoin and ethereum.

Finman thinks its best days are still ahead. "Personally I think bitcoin is going to be worth a couple hundred thousand to a million dollars a coin," he said.

The first time, he turned $1,000 into $100,000

Finman began investing in bitcoin in May 2011 at the age of 12, thanks to a $1,000 gift from his grandmother and a tip from his brother Scott.

Though he's close with his family — which he calls the "Elon Musk version of the Kardashians" — growing up in "small town" Idaho outside of Coeur d'Alene wasn't easy. Finman was especially frustrated with his high school teachers, and begged his parents to let him drop out at 15.

"(High school) was pretty low quality," he said. "I had these teachers that were all kind of negative. One teacher told me to drop out and work at McDonald's because that was all I would amount to for the rest of my life. I guess I did the dropout part."

Surprisingly, his parents — who met pursuing their Ph.D.s at Stanford — agreed. Finman sold his first bitcoin investments at the end of 2013, when they were valued at $1,200 a piece.

With the $100,000 Finman launched an online education company called Botangle in early 2014 that would allow frustrated students like him to find teachers over video chat. He also used the funds to move to Silicon Valley, did some fun things like meet Reddit co-founder Alexis Ohanian and traveled.

It was hard getting people to take a 15-year-old tech entrepreneur seriously, Finman admitted. He recalled being called in to interview with a "really, really high-up" unnamed Uber executive, who instead of listening to his Botangle pitch discouraged him and told him he would never win the bet with his parents.

Eventually he found a buyer for Botangle's technology in January 2015. The investor offered either $100,000 or 300 bitcoin, which had dropped in value at that time to a little more than $200 a coin. He took the lower cash value bitcoin deal because he believed it was "the next big thing."

"My parents asked 'Why don't you take the more cash?"' Finman explained. "But I thought of it more of an investment."

Since then, Finman has been managing his family and his own bitcoin investments. He's also kept busy on other projects, including working with NASA to launch a rocket through the ELaNa project. One thing he won't do is go back to school.

"I never got my GED, and I don't see the value in it," Finman said. "The purpose of that would be to get another education level and get a job. I had to learn through running a business. Instead of writing essays for English class, I had to write emails to important people."

Although the rest of his family has degrees — his brother Scott went to Johns Hopkins at 16 and now has an enterprise software company, while his other brother Ross went to Carnegie Melon at 16 for robotics and is now pursuing his Ph.D. at MIT — he's happy learning about the real world from experience.

"The way the education system is structured now, I wouldn't recommend it," Finman said. "It doesn't work for anyone. I would recommend the internet, which is all free. You can learn a million times more off YouTube and Wikipedia."

China to Shut Bitcoin Exchanges

Authorities to ban commercial trading of all virtual currencies

Sept. 11, 2017

BEIJING—Chinese authorities are ordering domestic bitcoin exchanges to shut down, delivering a heavy blow to once-thriving trading hubs that helped popularize the virtual currency pushing it to recent record highs.

China’s central bank, working with other regulators, has drafted instructions banning Chinese platforms from providing virtual currency trading services, according to people familiar with the matter. Regulators told at least one of the exchanges that the decision to shutter them has been made, one of the people said, while another said the unwinding may take several months.

Beijing isn’t banning people from investing in virtual currencies, and China hosts some of the world’s largest bitcoin miners—the operations that generate the cryptocurrency. Ending commercial trading in all virtual currencies is likely to further diminish use of bitcoin in a large and once-promising market, and sends a signal to regulators elsewhere mulling how to bring order to virtual currencies in their own markets, analysts said.

While China has in the past accounted for as much as 90% of trading activity, Chinese exchanges BTCC, Huobi, OKCoin and others represented more than 20% of global volumes in the past 30 days, according to database Bitcoinity.org.

The price of one bitcoin traded at around $4,158 Monday evening in Beijing, roughly flat for the day, but down about 16% from a record high on Sept. 1. Prices dropped after regulators moved to cool the market, issuing a ban last week in China on initial coin offerings, a kind of fundraising via virtual currencies.

The People’s Bank of China didn’t respond to a request for comment.

Beijing has ramped up scrutiny of the domestic bitcoin market and other virtual currencies since the beginning of the year—part of a major government effort to root out financial risks. Officials earlier this year circulated a draft of anti money-laundering rules for the exchanges, a powerful warning, even though the regulations were never formalized, according to people familiar with the matter.

The stakes for Beijing grew as prices of virtual currencies like bitcoin soared, adding to the risk of further speculation by domestic investors. Analysts and investors said one reason bitcoin prices rose last year was that Chinese investors began buying up the asset and selling the yuan in belief that the Chinese currency would fall.

Virtual currencies in theory can allow holders to bypass the traditional banking system to move money outside of China’s capital-controlled borders.

Officials from the central bank, cyberspace administration and banking, securities and other regulatory bodies considered various options for months but ultimately came to a consensus to shut down virtual currency exchanges, said the people familiar with the matter.

“Too much disorder was naturally a basic reason” for the ban, said one of the people.

Trading volumes have already plummeted in China, with authorities stepping up efforts to rein in the exchanges. Analysts said more activity is moving underground, where individuals can send virtual currencies to each other using private addresses, which serve like safe-deposit boxes.

The people said that regulators will likely have to tolerate noncommercial trading of virtual currencies. “The government also doesn’t have the power to control” that, said one person.

Speculation about a ban increased over the weekend, after a respected local financial news organization, Caixin, reported that such a move was coming. One of the people familiar with the matter said that regulators expect exchanges to report back on how they plan to unwind their businesses.

The ban was surprising for many, given that Chinese authorities have allowed bitcoin exchanges to operate within the mainland for years. The central bank defined bitcoin as a “virtual good” back in 2013 and had banned banks and third-party payment institutions from engaging in bitcoin-related activities. While exchanges got a scare, they were quickly allowed to continue operations.