Why China Will Drive The Price Of Bitcoin

Ok guys, this is why I believe that China will drive the price of Bitcoin and why the recent spike is just the beginning...

I've lived in China and everybody there is super bearish about their economy and growth model in general. All the money for big infrastructure projects basically comes from financial repression – meaning negative interest rates on your bank savings (Yes, you lose money when putting it in the bank!). Chinese people also do not have many venues to invest, which only leaves housing (already huge bubble) and dodgy "Wealth Management Products (WMPs)". These products are highly speculative short-term deposits with 5-10 per cent return rates. What do they speculate in? Mostly housing... Well, the whole economy is a big Ponzi scheme and due for a crash.

Now, here is why Bitcoin is so interesting for Chinese and why I think that it will continue to drive the price. For one, it allows Chinese Yuan (RMB) to US Dollar and Euro conversion. Don't forget that the RMB is not freely convertible and it is very difficult to bring your cash out of the country. People regularly get caught for that and face harsh penalties. There is a whole illegal money-transfer network to move money across the border called "fei qian". Bitcoin offers the same service with a lot less risk involved and nearly instantaneous. On top of that, it can also be seen as a long-term investment (think Gold 2.0) with even better returns than some dubious real-estate in a Chinese ghost city ("Ordos").

With so much liquidity in the Chinese economy, I can imagine that investors (and WMPs) are starting to see Bitcoin as a whole new asset class for their portfolio, which in turn further drives the price up, attracting more media coverage & investors, and so forth. To sum it up, Bitcoin could be the exit strategy for rich Chinese scrambling to secure their money and China will be the motor for price increase in the coming months/years. However, the Chinese government could at some point attempt to crackdown on Bitcoin exchanges or rule them illegal (precedent set with banning "QQ Coins"). Good luck with that, but on the other hand the Chinese state has strong control over the internet, at least they could make it difficult to convert RMB to Bitcoins.