Many have speculated that the recent increase in the price of bitcoin ($542 USD on Bitfinex at time of publication) can be traced to China, where Bitcoin trading has doubled on some exchanges in the last four days as Chinese investors respond to a recent currency devaluation, and look for ways to avoid the government’s stringent capital controls.

China’s economy has been flatlining for some time now. That and the strengthening U.S. dollar prompted the People’s Bank of China to devalue the yuan by 0.45 percent last Friday to its lowest level since February 2011.

New Interest in Bitcoin

Huobi and OKCoin, the two largest Chinese exchanges that now account for some 92 percent of Bitcoin global trading by (self-reported) volume, both reported almost double the usual trading volume over the past weekend. BTCC, China’s third largest exchange, also reported a surge in bitcoin trading volume, setting a new record on its Pro Exchange.

OKCoin’s Jack Liu, Chief Strategy Officer, confirmed the surge in trading volume and told Bitcoin Magazine:

“After two long years, Bitcoin’s price crossed back across the USD $500 mark led by OKCoin’s CNY exchange – the largest digital asset trading platform in the world. The price first reached $500 on May 28, and was followed later on by OKCoin’s USD exchange and other global platforms such as Coinbase.”

Huobi’s CEO Leon Li said that trading volume on their exchange has doubled in the last few days as investors look for a safe haven:

“We do think that China’s economic situation has certain influence to the price. Totally, RMB has been on the trend of depreciation for a long time, and the domestic stock market has been weak since last September. More and more Chinese investors and their hot money need a new investment market, and a convenient alternative investment like Bitcoin is easy to be accepted by the traders.”

Bobby Lee, CEO of BTCC exchange told Bitcoin Magazine:

“BTCC has seen very high trading volumes this past weekend. In fact, on our Pro Exchange, we saw record volumes on Friday, the highest ever since our launch last October. This recent rally was indeed led by the China market, which gives credit to the theory that people were predicting today’s yuan devaluation.”

Jack Liu believes that China’s economic situation is in for a long period of flat or stagnant growth.

“We believe with the Chinese economy is entering into a “L-shaped” recovery rather than a “U-shaped” one; the dearth of mainstream, prudent investment choices has made Bitcoin a relatively attractive choice.”

However Huobi’s Leon Li told us that he sees more than just these short-term economic factors in explaining the growing popularity of Bitcoin:

“The policy environment has been more and more tolerant worldwide, and blockchain technology has been acknowledged by academic and traditional financial institutions. Even People’s Bank of China (China’s central bank) is discussing blockchain. In the long term, when the price returns to rationality, it would vibrate by those fundamentals.”

Bitcoin Halving in July Seen as a Possible Cause of Price Increase

Both Jack Liu and Leon Li see the upcoming halving as a significant factor in the increase in the price of Bitcoin. Liu told us:

“This is especially in light of the fact that the Bitcoin supply will be halved in just over a month, adding to deflationary supply pressures and increasing the digital asset’s investment value in the short, and long term.”

Bitcoin Continuing a Steady Increase in Price and Market Capitalization

As noted in this recent Bitcoin Magazine article about the price of Bitcoin, the digital currency is showing a steady and almost methodical ascent, with moderate increases in both price and market capitalization.

It appears that China’s bad fortune is good for Bitcoin, although Jack Liu notes that economic uncertainty is not just limited to China. He told us:

“It was not a surprise to see the upturn. After all, the whole world is facing slower growth and low to negative interest rates, not just China.”