Major World Events That Affect Bitcoin’s Value

Japan- the World’s Largest Bitcoin Market

On April 1st Japan (NYSEARCA:EWJ) enacted a law that accepted Bitcoin (Pending:COIN) has a legal payment method. Since then, Bitcoin trading volume has skyrocketed and increased its value by 80%. During this time, Japan surpassed China (NYSEARCA:FXI) and became the world’s largest Bitcoin market in the world. The figure below illustrates the strike enacted by Japan’s (NYSEARCA:DXJ) legalization of the cryptocurrency.

Source: investing.com

Bitcoin’s Short Term Volatility and Long Term Bullish Market

How much longer can this steep increase go on? I believe Bitcoin will continue to surge in the long term. However, since the currency is so volatile it is possible to see a sudden change in the cryptocurrency’s trend. Bitcoins immediate trends depend on three major world events. The first being the Chinese (NYSEARCA:GXC) economy. The second event is the uncertainty in the European Union (BATS:EZU) caused by Brexit Article 50 (NYSEARCA:EWU) and the French (NYSEARCA:EWQ) Election. The final aspect is the SEC’s position on the Bitcoin ETF. Developments in these three areas could cause huge movements in Bitcoins value.

There is a credit bubble on China’s economy that is likely to pop and increase Bitcoin’s value. Following the 2008 financial crisis, China (NYSEARCA:ASHR) rapidly increased their credit to keep up with unsustainable growth levels. However, the increase in credit far surpassed their economic growth. Since 2008 China’s debt-to-GDP ratio increased by 150%. Recent reports show that China’s debt continues to grow disproportionally to their GDP. The figure below shows China’s GDP versus economic growth compared to other rapidly growing economies. Notice that China’s data produces a significantly flatter line than other countries.