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The cryptocurrency was at US$440 on HKEx on November 4, its highest since it dropped below US$200 in January 2015

Though Bitcoin entered the limelight in association with murky Internet dens like Silk Road — now defunct, with its alleged founder arrested — the peer-to-peer electronic payment system could be making a turnaround with recent, positive mentions in mainstream media.

The cryptocurrency was at US$440 on HKEx at noon on November 4, its highest this year since January 2015, a one-month jump of over 70 per cent.

For context, Bitcoin hit an all-time high of around US$1,1150 in late 2013, staggered to below US$400 the next month, bounced back, then ebbed and flowed before dropping to below US$200 January of this year.

There has been much speculation about the sudden price increase, with much of it pointing to China-fuelled financial incentives.

A very basic refresher before jumping into the speculation: Bitcoin is a decentralised, digital currency, which lets users send money without fees and a central bank. The blockchain is a public ledger of all transactions in the Bitcoin network, and the market price of bitcoin changes with supply and demand.

Also Read: Why Bitcoin’s success story has only just begun

e27 caught up with Leonard Weese, President of the Bitcoin Association of Hong Kong (BitcoinHK) and other members of the group at a monthly Bitcoin meet-up in Hong Kong yesterday, where around a dozen enthusiasts gathered to talk bits, bots, blockchains and more.

1. Chinese are flocking to Bitcoin as China tightens controls on capital

The Chinese government enforced strict cash withdrawals controls a few weeks ago, capping the amount of money the Chinese can withdraw outside the country.

This, alongside the slowdown of the Chinese stock market has cast Bitcoin in a good light as a solution to move money out of China.

The price of Bitcoin has now been consistently higher in China, which indicates buying pressure. At the time this article was written, it cost US$459 to buy a Bitcoin in China against US$400 in Hong Kong.

There’s also general growing interest, marked by events and mainland investments.

Virgilio Lizardo Jr., Head of International at Bitbank, was present at the BitcoinHK meeting. Lizardo says the first global blockchain summit was held in Shanghai mid-October. The nation’s largest automobile manufacturer, Wanxiang Group, announced at the conference that its finance arm would invest US$50 million in a venture capital fund that will invest in applications for blockchain technology.

“Around the same time, a message was also posted on the cyberspace protection website in China, with a mild positive view of Bitcoin, which got overblown in the market, [read as] China endorsing Bitcoin,” adds Lizardo an incident he says added fuel to the Bitcoin fire.

Also Read: Bitspark enables Bitcoin remittance between Hong Kong and the Philippines

2. Sex, drugs and rock n’ roll

OK, just kidding. But drugs have an undeniable association with Bitcoin. Though the notorious Silk Road no longer exists, multiple successors have appeared offering ways to buy other things, including drugs, at a reasonable price.

OpenBazaar, which is about to be released, is an open source project that allows users to trade goods with each other, with no fees and no restrictions.

“It is to eBay what Taobao was to a flea market. It will cut out the last middlemen that exist in online e-commerce, only leaving the producers and consumers.This has huge implications for China. Imagine a global Taobao, but without censorship, fees or payment,” says Weese.

“Of course, it may be filled with drugs in the beginning. But that will only prove how unstoppable it is,” adds Weese, good-naturedly.

3. FOMO and bitcoin’s recognition as a currency

“Bitcoin is either worth nothing or worth millions. When the price is stagnant at US$250, your mentality is like, ‘I can los lose US$250 dollars.’ But when the price starts rising beyond that and you see a big increase, the mentality becomes more, ‘it’s possible I can gain a million dollars’,” says Weese.

People tend to buy when others are, and when the price is rising.

Conveniently, the European Court of Justice recently ruled that Bitcoin is free from value-added tax, boosting Bitcoin’s legitimacy as currency worldwide.

Also Read: Bitcoin transaction service Coinbase enters Asia via Singapore 

4. The Economist made blockchain its cover feature

The Economist made blockchain technology its cover and feature story in the October 31 edition. The title? “The trust machine — How the technology behind Bitcoin could change the world.”

“Bitcoin has a bad reputation,” it begins.

“But most unfair of all is that bitcoin’s shady image causes people to overlook the extraordinary potential of the ‘blockchain’, the technology that underpins it. . . The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.”

Ergo, Bitcoin has bad buzz, but blockchain technology is revolutionary.

Worth mentioning is that the Economist also awarded Satoshi Nakamoto (the Founder of Bitcoin who has never provided any personal details and may or may not be Japanese — this is real life Mr Robot) the ‘No Boundaries’ award at the Innovation Awards & Summit 2015 in Hong Kong on October 14, 2015.

5. Investment in bitcoin-related tech startups topped US$1 billion dollars

Earlier this year, Chain Inc, a San Francisco company that helps other companies apply the blockchain to their business, raised US$30 million from major investors including Capital One and Citi Ventures.

And Bitcoin startups are trendy: Cameron and Tyler Winklevoss, aka The Wink Twins from The Social Network, opened a New York-based startup Gemini — a “fully-regulated US bitcoin exchange” that the Founders aim to turn into the ‘Google of bitcoin.’

Gemini is meant for big banks but can also be used by individuals.

Also Read: Singapore-based Bitcoin platform BitX raises US$4M in Series A

Other factors worth an honourable mention

There’s the Russian ponzi scheme, dubbed MMM, which started to build steam in many parts of the world using Bitcoin to transfer money for its participants, putting buying pressure on the markets.

The MTGox debacle (MTGox controlled at least 70 per cent of the Bitcoin market) has hit such a low that it can’t possibly get worse, so it can only go up, according to Weese.

So what does this mean?

“The [positive news] is bolstering confidence in the technology for people who were on the fence,” says Lizardo.

Investment in Bitcoin and blockchain technology fronted by big time companies such as Visa, Mastercard and AMEX means that Bitcoin is getting a PR image makeover, shedding its sketchy skin.

Hate it or love it, buy it or not, Bitcoin and its uses will only dominate more headlines and you’ll be watching movies (Dope) that talk about Bitcoin. This is why you need to talk about Bitcoin, even if you’re still not sure what it is.

Also Read: Want to use Bitcoin? Then you need to understand ‘smart contract’

Image Credit: Shutterstock 

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