Bitcoin surged to a two-year high amid expectations supply of the digital currency is set to shrink next month.
The cryptocurrency rallied to US$683.89 yesterday in Hong Kong — its highest since February 2014 — according to data compiled by Bloomberg. It traded at US$677.93 as of 10:53am, up 17 percent from Friday.
Profits from mining bitcoins are to be reduced next month, a process that is written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi (火幣).
Increased attention from venture capitalists and banks on blockchain, the technology of digital ledgers, has boosted bitcoin’s legitimacy, OKCoin chief strategy officer Jack Liu said in Hong Kong.
“The halving of the supply of bitcoin is attracting many retail investors,” Liu said. “More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.”
The price of bitcoin has mostly recovered following a steep decline to less than US$200 in January last year from more than US$1,000 in December 2013.
Bitcoin’s rebound is coinciding with weakness in the yuan, which yesterday fell the most in two months in Shanghai. Losses have accelerated in recent weeks as the US dollar strengthened and China’s economic outlook deteriorated.
The nation’s currency is trading near the five-year low it touched in January, while the Shanghai Composite Index is this year’s worst performer among 93 global stock measures. Goldman Sachs Group Inc warned this month that the yuan weakness might trigger capital outflows and increase bets on a one-off devaluation.
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