Incredible bitcoin rally in China to meet ‘inevitable crash’: investor

November 18, 2013 Leave a comment

Incredible bitcoin rally in China to meet ‘inevitable crash’: investor

Staff Reporter

2013-11-17

Bitcoin, a decentralized online currency, began the second round of revaluation this year in early July after its price has jumped to over US$460 from the original US$200 for every BTC. Exchange rates against the renminbi topped 2,700 yuan (US$443) at its peak, according to huobi.com, a site dedicated to bitcoin trading news. Chinese women have played a critical role in the rally, accounting for 40% of VIP customers. VIPs are defined as traders with over 10 million yuan (US$1.6 million) in total transaction volume using the online currency, according to the report.The rally, following a slow-growth period, has brought with it a rise in fraud and bankruptcy, as well as the involvement of international speculators. The risk of a market crash has investors wary over the unstable currency’s trends.

The current rally followed the previous rollercoaster ride, which carried the currency from US$13 to over US$250 before plummeting back to less than US$70. Many thought the currency had gone bust before the newest rally began.

Several thousand stores worldwide have accepted Bitcoin as a legitimate payment method and many websites have allowed for transactions in the virtual currency, including Mt Gox of Japan, BTC China and Okcoin of China, and BitStamp of Slovenia.

According to Genesis Block, a research center on digital currencies, China’s daily transaction volume of Bitcoin topped BTC$100,000 at the end of Oct. 2013. The volume represents 50% of the global market, making China the world’s largest Bitcoin market.

Investments in Bitcoin, remain risky. Transaction websites are susceptible to attacks by hackers and shutdowns imposed by regulators, as well as sudden bankruptcies of operators. In Oct. 2013, a popular Bitcoin trading site, GBL, shut down abruptly. The operator fled with the funds before most investors had an opportunity to withdraw their money from their accounts. Twenty million yuan (US$3.3 million) in investments from around 500 people vanished.

The losses incurred were especially large because of GBL’s use of leveraged transactions. When the case was reported to the police, the latter had no knowledge of the virtual currency, a problem complicated by the fact that GBL is registered in Hong Kong.

With its circulation confined initially to a small circle of hackers and aficionados, Bitcoin has become increasingly popular worldwide, especially China. Shenglu Property, under the auspices of a major domestic online games producer, Shanda Interactive Entertainment, has even allowed payment in Bitcoin for a realty project in Shanghai.

In April, Duan Hongbin, a financial columnist and a first-generation Bitcoin investor in China, proclaimed the digital currency has spun out of control and formed a bubble encompassing people from around the worldwide. It would soar to an incredible level before ruining investors with its inevitable crash, said Duan.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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