Bitcoin Prices Lose Momentum After Attempting New 2016 Highs

The price of bitcoin declined in the latter half of the week after coming within striking distance of 2016 highs on robust demand from emerging markets.

The BTC/USD exchange rate was down 1% at $731.20 Saturday at 12:19 pm ET (17:19 GMT). The pair briefly traded near $755 on Wednesday before returning lower. The BTC/USD established a two-year high of $781.31 in mid-June, according to CoinDesk.

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Bitcoin has built strong support above $700 after the government of India decided to purge high-value currency notes, leaving investors scrambling for alternative stores of value. The cryptocurrency has been supported all year long by growing Chinese demand in the wake of repeated yuan devaluations and stricter capital controls. Cryptocurrency has also become a more viable investment vehicle among the digitally-savvy mainstream. As a result, by the end of November, bitcoin will have enjoyed its strongest stretch above $500.

Further devaluation of the yuan could push bitcoin prices higher in the short-term, as investors look to diversify away from volatile fluctuations in fiat currencies. The US dollar is currently enjoying its strongest bullish streak in well over a decade, as investors view a December rate hike by the Federal Reserve as a virtual lock. According to the CME Group’s FedWatch Tool, the likelihood of a December liftoff is 93.5%. Investors will have a better idea about the pace and timing of future rate hikes following a deluge of economic data next week.

Bitcoin was in the news this week after Japanese insurer Mitsui Sumitomo began offering cryptocurrency exchanges a new insurance policy. The new plan is said to be more elaborate than the previous one-off policies that were previously marketed to bitcoin exchanges.

The need for better insurance protection came to a head during the summer when Hong Kong-based exchanged Bitfinex lost $72 million worth of bitcoins in a security breach. The firm, which was thought to be insured, had to resort to “socializing” its losses across existing account holders.

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