Bitcoin has seen incredible rises over the past few years, with those fortunate enough to have invested becoming very wealthy off the back of its climb.
In 2017, the price of bitcoin stood at $5,000 (¥34,900), whilst the latest numbers are running at close to twice that figure. However, events both in China and potentially the US could put increasing pressure on the value, currently standing at around $9,100 (¥63,600).
Here in China, the CSI 300 has gone up by 17.7% since June 29, and it still continues to rise. It has currently reached levels last seen in June 2015 and although that would seem to be positive, there are fears from government that the market may be getting overheated.
The stock market crash of 2015 left the Chinese government wrong-footed, in terms of the scale of the stock market’s boom prior to the crash as much as the actual crash itself. That has led to suggestions that they could look to stifle the current growth and minimise the risk of another occurrence.
Recently, two state-owned funds announced that they were planning to cut back on stock holdings that have soared recently, protecting themselves against a potential crash. The moves by China’s National Council for Social Security Fund and National Integrated Circuit Industry Investment Fund have been interpreted by many as the Chinese government recognising that the current boom is going too fast. By cutting back on the stocks they hold, it is seen as a warning that they are not prepared to make the same mistakes twice.
A fund manager from Shanghai Wanji Asset Management Company, Niu Chunbao, explained in simple terms. “The signal could not be clearer: stocks have just become too hot for the regulators’ liking. A slight dip or so may put their minds more at ease at this point.”
How does this affect the price of bitcoin? If the market does indeed slow down, it would impact the price of bitcoin because of the amount being purchased by Chinese retail and institutional buyers. If the market is booming, then they are more likely to buy via Tether and OTC desks. If there is a general wariness around the currency, then they are less likely to buy and as such, the price could fall.
At the moment, the concerns around the Chinese market are not having a serious impact, with a bitcoin trading price chart showing some stability through May and June. However, as the economic fall out from the recent world situation continues, it could be events elsewhere in the world that have the most significant impact. In the US, the race to become the next president is one evolving situation that will also have a bearing on the future value.
Donald Trump has put much emphasis on the NASDAQ and Dow Jones during his run toward a potential second term, but his opponent, Joe Biden, is focused on working-class families. With Trump’s recent handling of the world situation seeing a swing away from him, there is every potential Biden could be the next US president. If he is, and he does deliver on his promise of increasing corporation tax from 21% to 28%, then the US stock market would be adversely affected and that in turn could further impact the price of bitcoin.
By Mia Reeds