Dollar Draws First Blood; Reasons for Bitcoin Surge
eToro | Jan 03, 2017 11:43
Today's highlights
Dollar Draws First Blood
Coming Right Up
Reasons for Bitcoin Surge
Please note: All data, figures & graphs are valid as of January 3rd. All trading caries risk. Only risk capital you can afford to lose.
Market Overview
The news headlines and social media are starting to resume their normal hum again. If the start of this year was anything like the end of last we're in for a wild ride. Europe managed to put out some good economic data yesterday.
The stocks have had their pre-year-end pullback but overall have managed to maintain their high levels. Asian stocks are flying today with the Aus200 and China50 up about 1.25%.
The currency markets are alive and the US dollar has drawn first blood for the year. Not only did it open the new year with a gap higher, it's been climbing steadily since. The markets are still not fully liquid and Japan, which usually counts for most retail forex is still on holiday, so we may see a few more liquidity gaps before the end of the day.
Fair bit of News
The Economic Calendar started lightly this week but it will build up gradually and finish big with the NFP on Friday. Last night we got some positive manufacturing numbers from China. The UK Manufacturing numbers will be published shortly. The highlight today will be the ISM Manufacturing data from the US, which should kick off the Wall Street session nicely.
Pushing Bitcoin Further
The two questions that I keep getting about bitcoin are why is it surging, and how high can it go? So today I wanted to show some data that might help us answer the first question.
The two biggest reasons we've been hearing so far are China and India. Indeed when speaking with my colleagues in eToro China the concern of a Renminbi devaluation is a growing rapidly. New regulations prevent Chinese citizens from sending money abroad and this is becoming a serious issue. New capital control measures go into effect on July 1st that will limit foreign transactions to ¥200,000, which is less than $30,000 at the moment and shrinking fast.
The currency is devaluating quickly. As far as the USD/CNH is concerned. All eyes are on the very significant level of 7.00 yuans to the dollar. So Bitcoin does seem to provide at least a partial solution for people trying to get their money out of the country and out of a sinking currency.
Our China Operations Director Adam Efrima had this to say:
Bitcoin is becoming more widespread in China. Everyone here is a bit connected or at least heard of the blockchain and Alt coin trading is increasingly common and people react to what might very well be a tech revolution in the making. In 2013 Bitcoin was a virtual coin, now it's more common to see it as a representation of Blockchain technology, there is a change in the state of mind.
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So the state of mind has changed, but when I looked for confirmation in our network I found something else that shocked me to the core. Let's see if you can spot it.
Here is our volume on bitcoin over the past month broken down by region
As you can see, it's not China or India dominating here. It's the UK!!
Right, but we have more clients in the UK. China is still a growing region in eToro, so maybe that's why?... Nope!
Even when we break it down as a percentage of holdings by region, UK still takes the cake!
Perhaps, and this is just a suggestion, Brexit has more to do with the Bitcoin surge than we may have previously though.
I can't stop thinking about India though. For the moment, it doesn't make sense that a nation living from paycheck to paycheck would be able to afford to get involved in something as intangible as digital currency. However, if we do start seeing vendors in New Dheli markets with signs on their shops like the one below, it could prove to be the tipping point for mass acceptance of the digital currency and the beginning of the replacement process for the old outdated Fiat System that we're using now.
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