It may come as no surprise to veteran bitcoin users. China, which helped fuel the last bitcoin rally in late 2013, has been significantly contributing to the current bitcoin price spike.
The recent price has rallied to ~$700 USD over the past few days. Many speculate on why the price has risen, but nobody knows for sure why there has been such a huge demand for bitcoin causing the increase.
If you look at the LocalBitcoins markets, you can clearly see that China is leading the recent spike. The chart below shows the market spike in Chinese Yuan (CNY).
The highest point on the chart is for one week of trading volume equal to $5,065,611 CNY, which converts to $768,052 USD. If you look at the CNY exchanges you can see the volume over the past 24 hours has been high as well. For example, Chinese bitcoin exchange Huobi has traded 461,569 BTC over the past day. And another big chinese exchange BTCC has traded 57,853 BTC over the past day.
The reason for the sudden demand from China is unknown exactly. It could be from capital flight, which BTCC exchange CEO Bobby Lee has said before that this is a known practice in China when it comes to bitcoin. Six days ago at around the beginning of the price spike, Seeking Alpha wrote “last night, we got the May figures for the Chinese FX reserve balance showing yet another decline and indicating continued capital flight from the world’s second largest economy.”
China however is just one factor. If you look at other local trading charts by country you can also see that Russia, Venezuela, and the United States are the biggest contributors for the past week. Another reason for the recent demand has been attributed to the upcoming bitcoin halving, which is where the mining rewards will be cut in half, decreasing the overall amount of coins that are introduced into circulation.