Was China Behind Bitcoin Rally?

The past few days have been particularly exciting for bitcoin lovers with BTC/USD breaking down all resistances and crossing above 500 for the first time since last August. On Wednesday, bitcoin price hit 502.00 for a brief moment before sliding to 408 (Wednesday’s close).

While, a number of positive news could have attributed to the rise in the pair – MasterCard investing in Digital Currency Group, EU court ruling that Bitcoin transactions are VAT exempt, launch of much awaited Gemini Bitcoin Exchange, a recent report from Reuters said that rising demand for the digital currency in China is cited as the reason behind the recent surge.

A report from CryptoCoinsNews published last month said that China accounts for 80% of the global bitcoin trading volume. In particular, it focuses on a recent publication from the Cyberspace Administration of China (CAC), titled “Electronic money regulation on the agenda”.

The CAC report not only acknowledges bitcoin but also points towards a “post-bitcoin era” and says that the revolutionary changes brought about by bitcoin and its blockchain technology cannot be ignored.

Bitcoin price also moved northwards in August after the surprise "one-off depreciation" of the yuan by the People's Bank of China. The yuan devaluation led to price divergence between USD and CNY exchanges as holders of yuan resorted to bitcoin as a safe haven.

BTC/USD currently trades in the red at 391.39 levels at the time of writing. Support is seen at 350.00 levels and a break below could drag the pair to 320.00 levels. On the reverse side, it faces resistance at 453.92 levels and a break above could see it testing 500.00 levels and then 528 levels.