China, and the Soaring Price of Bitcoin

Tyler Cowen, writing at Marginal Revolution:

Right now, you can think of the value of Bitcoin being set in the same way that the value of an export license might be set through bids. If/when China fully liberalizes capital flows, the value of Bitcoin likely will fall. A lot. To the extent the shadow market value of the yuan rises, and approaches the level of the current quasi-peg, the value of Bitcoin will fall, by how much is not clear. Or maybe getting money out through Hong Kong (or Shanghai) will become easier and again the value of Bitcoin would fall. If Beijing shuts down BTC China, the main broker, which by the way accounts for about 1/3 of all Bitcoin transactions in the world, the value of Bitcoin very likely will fall. A lot. You will recall that the Chinese government shut down the virtual currency QQ in 2009; admittedly stopping Bitcoin could prove harder but still they could thwart or limit it.

(Via Scott Simpson.)

Thursday, 28 November 2013

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