Chinese demand drives bitcoin to 10-week high as yuan hits six-year low

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By Jemima Kelly

LONDON Oct 11 The price of web-based digital
currency bitcoin jumped to a 10-week high on Tuesday,
as worries about a further weakening of the yuan drove increased
demand from China.

The Chinese currency hit a six-year low of 6.72 yuan per
dollar on Tuesday — the first day of trading following a
week-long holiday — after the central bank set a weaker
guidance rate, fuelling market expectations that it may allow
further depreciation.

State-owned Chinese banks leapt to defend the 6.7 level when
it was breached in mid-July but have not been seen buying yuan
heavily so far this week, adding to questions over whether China
was allowing the currency to resume its descent, after steadying
it through much of the summer ahead of major political events.

Bitcoin is a web-based “cryptocurrency” that can move money
across the globe quickly and anonymously with no need for a
central authority. That makes it attractive to those wanting to
get around capital controls, such as China’s.

Around 95 percent of all bitcoin trading is done via Chinese
exchanges, according to industry website Coindesk, so any
increase in demand from the Asian superpower tends to have a
particularly significant impact.

“The Chinese central bank’s decision not to intervene in
stabilising the yuan means traders are running scared. Bitcoin
is a port in the storm,” said Charles Hayter, founder of digital
currency website Cryptocompare.

Bitcoin jumped more than 3 percent against a dollar that was
stronger against most central bank currencies, to a high of
$637.21 on the Bitstamp exchange, its strongest since late July.

Some bitcoin experts said the web-based currency had also
been given a boost by what might be the end of a stalemate over
how to increase the capacity of the so-called “blocks” in which
bitcoin is processed. Dubbed the “bitcoin civil war”, the issue
caused one senior developer to quit earlier this year.

A “Scaling Bitcoin” summit was held in Milan last week to
address the issue, which attendees and bitcoin watchers said had
brought some progress on the issue. Daily transaction volumes
have been growing rapidly, hitting a record high above 280,000
last week.

“There were several technological advancements demonstrated,
some of which could be promising avenues to increase the number
of transactions that the bitcoin network could process,” said
Colin Platt, co-founder of blockchain start-up DPactum, and
formerly head of blockchain at BNP Paribas.

“These new advancements could once again position bitcoin to
continue to innovate and sustain higher transaction rates which
could foster wider adoption,” he added.

(Reporting by Jemima Kelly; Graphic by Nigel Stephenson;
Editing by Catherine Evans)

mm – leading Bitcoin News source since 2012

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