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Three key reasons the Bitcoin market may have suddenly rallied last weekend
Over the past weekend bitcoin watchers have seen a massive 20 per cent price rally. Interestingly, it immediately followed a period of stagnation and calmness.
Bitcoin prices are at their highest in 20 months and have surged from S$623.40 (US$452.98) on Friday morning to a peak of S$749.99 (US$544.97) over the weekend, according to our charts. As of Tuesday May 31, the price seems to have stabilized for the time being.
Bitcoin rally over the 27-29 May 2016 weekend
For larger context, there is some important news to take note of in this environment of volatility:
Yuan devaluation
China’s central bank has set the yuan daily reference rate at 6.5784 on 25 May 2016, the weakest level since February 2011.
Due to restrictions on bank transfers and moving cash out of the country, people have come up with various ways to move their money, bitcoin being one of them. Yuan devaluation can be a factor driving up the price of bitcoin.
Australian police bitcoin auction
Australia police will be auctioning off 24518 bitcoins, worth around USD$12.9m, confiscated as ‘proceeds of crime’. The auction will start at 12.01am AEST on 20th June 2016 and held over 48 hours in tranches of 2000 bitcoins.
Based on past auctions by the US Marshals Service, the events seem to spur investor interest and boosted bitcoin prices before the sale.
Also Read: Mobile Bitcoin wallet app Zebpay bags US$1M Series A funding
The risk is that if the buyers of these bitcoins sell them immediately, they will flood the market and drive down the price of bitcoins. Read more about this phenomenon here.
Bitcoin halving
Bitcoin halving will take place in July. This will halve the reward to mining each block from 25 bitcoin to 12.5 bitcoin. You can follow the countdown to halving here.
This will not only affect the supply of new bitcoins but also, indirectly, confirmation speeds. Due to the halving, some miners will be priced out at the current bitcoin prices.
Because ‘difficulty’ (a term referring to the ability to find hash algorithms below the target) will only adjust after 2 weeks, for a period of time there will be reduced hashing power on the bitcoin network.
The net effect of these changes on price is uncertain.
Also Read: Who ‘Satoshi’ is doesn’t matter: Hong Kong Bitcoin community
All these mean that the market might become more volatile these few weeks and there will be many eyes watching the bitcoin market.
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Leyi is passionate about FinTech and thinks blockchains will be influential in future. She is currently a summer intern at CoinHako.
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