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When Greece threatened to leave the European Union in , investors surged into the digital currency. The same thing happened when Britain voted to leave the European Union last year, and when Donald Trump defied polls to win the U. Last year held plenty such surprises for investors, and they collectively helped make bitcoin the best-performing currency of , analysts say. Bitcoin was created in by an unidentified programmer known as Satoshi Nakamoto. Instead, that is controlled by a global peer-to-peer network of computers.
People provide their computing power to the network to log transactions, which are recorded in a ledger that is publicly distributed across the network, called the block chain. New bitcoins are created as the computers in the network solve complex math problems that verify transactions in the block chain, a process known as mining. Because bitcoin is decentralized, it can be used anonymously — a feature that has made the virtual currency the payment system of choice for those seeking to evade taxes, launder money, fund hacking attacks or engage in other illicit behavior.
The currency also acquired a reputation for instability, due in part to hacking attacks on virtual exchanges that provoked wild swings in its value in past years.
But in the past few years, bitcoin has become more mainstream, attracting the interest of hedge funds, brokerages and other institutional investors, especially as risks for traditional currencies increase. Traders say one major force pushing up the value of bitcoin is surging demand from China, where people are using the digital currency to circumvent tight restrictions on moving money out of the country.
This has led to a massive outflow of cash from China. Chinese investment in the United States nearly tripled in compared with the year before, according to tracking by research firm Rhodium Group. Some of this money left China legally, and some did not. But Chinese people have found ways to get around these restrictions, moving money out of the country through channels like illicit import-export companies, gambling dens and alternative currencies like bitcoin.
The Rise of the Renminbi. Burniske agrees that China has recently been the largest driver in the value of bitcoin. He points to the chart below, which shows that the rise in the value of bitcoin is closely associated with the drop in the value of China's currency, which is known as the renminbi or yuan. But he expects the market for bitcoin to continue to grow, due in part to fundamental improvements in how the currency works. This article is published in collaboration with Wonk Blog.
The views expressed in this article are those of the author alone and not the World Economic Forum. We are using cookies to give you the best experience on our site. By continuing to use our site, you are agreeing to our use of cookies. Global Agenda China Blockchain Here's why bitcoin boomed in Ana Swanson reviews bitcoin in and examines rising demand in China. What can be done to economically empower women in Africa?
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