Bitcoin growing in popularity in China

Source: Btc123.com Graphics: GT

More than half the value of all Bitcoin transactions are conducted in yuan, according to data from US virtual currency research center Genesis Block, though experts warn that investment in Bitcoin is more riskier than other investment tools.[Special coverage]

Bitcoin, a virtual currency created by pseudonymous developer Satoshi Nakamoto in 2009, has attracted much attention due to its frequently changing and surging value. The total number of Bitcoins is fixed at 21 million.

The highest price of a Bitcoin in China Tuesday was 6,989 yuan ($1,146.60). while the highest price on November 1 was 1,275 yuan, according to Chinese Bitcoin trading platform btcchina.com. In less than 20 days, Bitcoin rose more than four times in value.

It had earlier reached $675 on Monday ahead of a US Senate hearing on possible regulation of the virtual currency, Reuters reported Monday.

Btcchina.com received an investment of $5 million from Shanghai-based Lightspeed China Partners and US venture capital company Lightspeed Venture Partners on Monday, Shanghai Business News reported Tuesday.

Bitcoin is traded in a 24-hour global market, without price limits or volume restrictions. As a decentralized currency, Bitcoin is not guaranteed by any laws or institutions.

China surpassed the US to become the biggest market for Bitcoin this year, news portal sina.com reported Tuesday.

Analysts said while Bitcoin can be used in some countries and regions to buy tangible goods in daily life such as drinks using a payment app on smartphones, in China it is mostly used as an investment tool.

The popularity of Bitcoin in China is more like a speculative ride driven by people's desire to gain profits in a short time, Tan Yaling, head of the China Foreign Exchange Investment Research Institute, told the Global Times Tuesday.

Bitcoin will not collapse soon as long as people still believe that Internet is the future and no other better virtual currency is created, Li Chao, an analyst with Internet service consultancy iResearch, told the Global Times Tuesday.

However, Bitcoin has shortcomings that are hard to overcome, Li said, noting the absolute total amount of Bitcoin protects it from inflation but also hinders it from effectively keeping up with the economy development.

It is also difficult to set an objective value for Bitcoin, and the fact that its value is set completely by the market leads to high risks, Li said.

In addition, as a virtual currency, unlike stakes or futures, Bitcoin is not backed by any real property; therefore, buyers of Bitcoin are confronted with risks higher than any other investment tools, he noted.

Meanwhile, the regulation of virtual currency is difficult for all governments and no government has come up with an effective regulation plan yet, said Li.

Ben Bernanke, the US Federal Reserve's chairman, said Monday that Bitcoin and other virtual currency might promote a faster, safer and more effective payment system but they also bring on regulation risks, news portal sohu.com reported Tuesday.

The anonymous and unsupervised nature of transactions using Bitcoin helps drug dealers, -traffickers, and other perpetrators to conduct their illegal business, according to Reuters.

Hong Kong-registered Global Bond Ltd, an online Bitcoin trading platform aimed at Chinese investors, shut down suddenly in late October, leaving hundreds of investors with more than 20 million yuan losses, media reports said.