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At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world. Until the end of 2013, Bitcoin wa

At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world. Until the end of 2013, Bitcoin was predominantly traded for US dollars. However, after the crash of 2013, miners consolidated in China and Bitcoin mostly traded for Chinese yuan[1]. At the start of 2017, regulators in China cracked down on digital currency exchanges[2] and trading quickly moved to Japanese yen and, more recently, South Korean won[3]. All of the early buyers are selling. This won't end well. [1]: http://www.businessinsider.com/bitcoin-trading-china-yuan-remnibi-2017-1 http://www.businessinsider.com/bitcoin-trading-china-yuan-re... [2]: http://fortune.com/2017/01/05/bitcoin-plunge-china-currency/ http://fortune.com/2017/01/05/bitcoin-plunge-china-currency/ [3]: https://www.bloomberg.com/graphics/2017-bitcoin-volume/ https://www.bloomberg.com/graphics/2017-bitcoin-volume/

pjc50 9y ago
I thought a lot of it was capital flight - Chinese nationals moving yuan out of the country, but to USD assets under their control, rather than an actual influx of wealth to China. After all, we have no real idea of "where" the bitcoin is held, if that means anything at all.
seanmcdirmid 9y ago
I think you meant from china to the rest of the world. The opposite direction isn’t very difficult to achieve via FDI or a simple bank transfer.
- nine_k 9y ago
  I'd suppose both flows exist. * Chinese energy producers and miners get cash into China from bitcoins they create and sell. * Chinese (early) buyers of bitcoin sell their coins in the West for cash stored in Western banks, or turned into other Western assets. I suppose the second stream is wider, but the first is not to be neglected, too.
  - seanmcdirmid 9y ago
    They don’t need bitcoin for the first stream, just for the second. Besides, there is plenty of excess capital floating around in china anyways, they don’t need many initial investment from the outside.
    - nine_k 9y ago
      People who mine bitcoins just make a living. The outflow of the capital from China via bitcoin must definitely be larger than inflow. And those who transfer wealth from China via bitcoin are keenly interested in bitcoin growing as much as possible without crashing. They likely have bought a lot for a much lower price, and want to cash out in the West, at least partially, without trouble.
scottnyc 9y ago
I agree that this might be a wealth transfer to China. Bitcoin inherently does not hold any value, it is a ledger. When someone buys bitcoin, someone else sells it and takes the cash out of the system. Right now, a lot of mining is still taking place in China since energy is cheap. These miners sell their coins outside of China and bring cash back into the mainland to pay for the energy and hardware used for mining. So in it's most simplistic form, when you buy a bitcoin, you are adding to the earnings of Chinese energy companies and hardware companies (and some naturally goes to speculators and miner margins).
- zeep 9y ago
  So if you buy a bitcoin for $15K, and sell it for $16K, you are taking wealth away from the Chinese?
  - bookmarkacc 9y ago
    No because you buy for 15k from them and sell for 16k to someone somewhere else in the world
    - deleted 9y ago
      [deleted]
    - zeep 9y ago
      Can we filter out sellers/buyers by country, to make sure?
      - 45h34jh53k4j 9y ago
        No and by design. Global trade is global, man.
- passwordreset 9y ago
  > Bitcoin inherently does not hold any value, it is a ledger. I just want you to be aware that those 2 sentiments are directly contradictory. A ledger has value -- an online, world-wide, decentralized, distributed, peer-to-peer ledger moreso. Estimate the value of the ledger (this is a significantly different endeavour than estimating market cap), divide that value by the total number of BTC in circulation, and you have estimated the value of a BTC.
neuro_imager 9y ago
You know you're citing articles that are almost a year old? Please also provide evidence that "all of the early buyers are selling".
- rudiger 9y ago
  Yes, I'm aware that an article from January 2017 has data backing up an assertion about global Bitcoin trading volume from 2012 to 2017. What is your point?
  - neuro_imager 9y ago
    Well, for one, drawing conclusions about the market circa market cap of 15B is very different to assessing it now at 275B.
runeks 9y ago
You seem to be confusing volume with liquidity. The question is not how many times a bitcoin (allegedly) changes hands on an exchange, but how many USD/CNY/JPY etc. are bidding on bitcoins right now. Why wouldn’t the CNY/JPY/KRW markets have much higher volume when they have zero trading fees? The magnitude of an exchange is measured by how many funds they have on deposit, not how often these deposits change owner according to the exchange’s internal database.
setecgastronomy 9y ago
> At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world. Actually it's a wealth transfer from china to the US. The chinese are using bitcoins as a means to evade CCP capital controls. There's a reason why china cracked down on bitcoin. Do you think china would stop wealth transfer to china? Of course not. They are trying to stop wealth transfer from china to the US.
- deleted 9y ago
  [deleted]
- petre 9y ago
  Not only to the US, to the rest of the world. Chinese money is also being parked in real estate in Australia, NZ, Switzerland, the UK etc.

pjc50 9y ago

I thought a lot of it was capital flight - Chinese nationals moving yuan out of the country, but to USD assets under their control, rather than an actual influx of wealth to China. After all, we have no real idea of "where" the bitcoin is held, if that means anything at all.

seanmcdirmid 9y ago

I think you meant from china to the rest of the world. The opposite direction isn’t very difficult to achieve via FDI or a simple bank transfer.

nine_k 9y ago
I'd suppose both flows exist. * Chinese energy producers and miners get cash into China from bitcoins they create and sell. * Chinese (early) buyers of bitcoin sell their coins in the West for cash stored in Western banks, or turned into other Western assets. I suppose the second stream is wider, but the first is not to be neglected, too.
- seanmcdirmid 9y ago
  They don’t need bitcoin for the first stream, just for the second. Besides, there is plenty of excess capital floating around in china anyways, they don’t need many initial investment from the outside.
  - nine_k 9y ago
    People who mine bitcoins just make a living. The outflow of the capital from China via bitcoin must definitely be larger than inflow. And those who transfer wealth from China via bitcoin are keenly interested in bitcoin growing as much as possible without crashing. They likely have bought a lot for a much lower price, and want to cash out in the West, at least partially, without trouble.

scottnyc 9y ago

I agree that this might be a wealth transfer to China. Bitcoin inherently does not hold any value, it is a ledger. When someone buys bitcoin, someone else sells it and takes the cash out of the system. Right now, a lot of mining is still taking place in China since energy is cheap. These miners sell their coins outside of China and bring cash back into the mainland to pay for the energy and hardware used for mining. So in it's most simplistic form, when you buy a bitcoin, you are adding to the earnings of Chinese energy companies and hardware companies (and some naturally goes to speculators and miner margins).

zeep 9y ago
So if you buy a bitcoin for $15K, and sell it for $16K, you are taking wealth away from the Chinese?
- bookmarkacc 9y ago
  No because you buy for 15k from them and sell for 16k to someone somewhere else in the world
  - deleted 9y ago
    [deleted]
  - zeep 9y ago
    Can we filter out sellers/buyers by country, to make sure?
    - 45h34jh53k4j 9y ago
      No and by design. Global trade is global, man.
passwordreset 9y ago
> Bitcoin inherently does not hold any value, it is a ledger. I just want you to be aware that those 2 sentiments are directly contradictory. A ledger has value -- an online, world-wide, decentralized, distributed, peer-to-peer ledger moreso. Estimate the value of the ledger (this is a significantly different endeavour than estimating market cap), divide that value by the total number of BTC in circulation, and you have estimated the value of a BTC.

neuro_imager 9y ago

You know you're citing articles that are almost a year old? Please also provide evidence that "all of the early buyers are selling".

rudiger 9y ago
Yes, I'm aware that an article from January 2017 has data backing up an assertion about global Bitcoin trading volume from 2012 to 2017. What is your point?
- neuro_imager 9y ago
  Well, for one, drawing conclusions about the market circa market cap of 15B is very different to assessing it now at 275B.

runeks 9y ago

You seem to be confusing volume with liquidity. The question is not how many times a bitcoin (allegedly) changes hands on an exchange, but how many USD/CNY/JPY etc. are bidding on bitcoins right now. Why wouldn’t the CNY/JPY/KRW markets have much higher volume when they have zero trading fees? The magnitude of an exchange is measured by how many funds they have on deposit, not how often these deposits change owner according to the exchange’s internal database.

setecgastronomy 9y ago

> At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world. Actually it's a wealth transfer from china to the US. The chinese are using bitcoins as a means to evade CCP capital controls. There's a reason why china cracked down on bitcoin. Do you think china would stop wealth transfer to china? Of course not. They are trying to stop wealth transfer from china to the US.

deleted 9y ago
[deleted]
petre 9y ago
Not only to the US, to the rest of the world. Chinese money is also being parked in real estate in Australia, NZ, Switzerland, the UK etc.