Bitcoin volatility in the first week of 2017 exceeded 28%. The cryptocurrency rose to the record $1150, then fell below $820.
The drastic bitcoin price growth began in late December. If two weeks before the New Year bitcoin traded at $780, by the end of December it climbed up to $968. The new 2017 year the cryptocurrency met overcoming the psychological barrier of $1,000. The rate continued to soar amid speculations that in the coming months, it might surpass the previous historical high of $1,138 in November 2013. And so it happened on 5 January when bitcoin hit the mark of $1150.
“We are seeing the aftermath of zero interest rates run amok. So bitcoin is a healthy reminder that we don't have to hold on to dollars or renminbi, which is subject to capital controls and loss of purchasing power. Rather it's a new asset class,” Bobby Lee, chief executive of BTC China, told CNBC.
China accounts for more than 98% of the total volume of bitcoin trading, the main exchange platforms being BTCChina, Huobi and OKCoin. The factors led to the bitcoin price increase, according to experts, were the yuan devaluation and the tightening of cross-border capital flows. Investors turned to cryptocurrencies to avoid the excessive regulatory control on behalf of the Chinese authorities.
“Chinese capital controls are a big part of what creates demand for Bitcoin,” Gil Luria, director of research at Wedbush Securities, told Forbes.
However, on 5 January, bitcoin price dropped to $951. This change was driven by the strengthening of yuan offshore exchange rate by 1%. On 7 January, the cryptocurrency traded at around $819.4. The reason for the further devaluation of bitcoin was the reports that Chinese regulators were going to further tighten control over the use of cryptocurrencies in order to cease capital outflows from China. According to Tencent Finance, the State Administration of Foreign Exchange (SAFE) has got concerned about the ways bitcoin could be used to avoid capital controls, CoinDesk writes. Earlier in December, The South China Morning Post reported that policymakers might tighten capital controls.
At the end of the last week, according to Caixin, the People’s Bank of China met top managers of the leading Chinese crypto trading platforms urging them to comply with the anti-money laundering legislation, including the know-your-customer (KYC) principle.
As of 9 January, bitcoin trades at $893. The total market capitalisation of the cryptocurrency has exceeded $14.4 billion.