A-share: Bitcoin prices return to the blockchain sector and then rise to the catalyst

Bitcoin is currently regarded as a safe-haven asset. In the context of uncertainties, bitcoin has risen for five consecutive trading days since last Tuesday, and it has shown an upward trend on the 5th. In addition, the People's Bank of China recently held a video conference for the second half of 2019, which called for an accelerated pace of research and development of China's legal digital currency. Affected by the above factors, on August 5th, the A-share market blockchain sector once strengthened sharply. The blockchain index rose 1.90% in early trading and closed down 0.22%.

Since the beginning of this year, the blockchain index has risen by less than 29%, but the bull stocks in the sector have appeared frequently. Among them, Jinyi Technology (002869), Kelan Software (300663) and Jinzheng (600446) increased by 217.8%, 175.6% and 98% respectively. Analysts believe that blockchain technology has attracted worldwide attention and prompted governments to speed up the assessment and discussion of the changes that blockchains may bring to future social life and industry development. Stimulated by many favorable catalysts, the blockchain sector will remain active for a long time.

Bitcoin turned into a safe-haven asset

Since the birth of Bitcoin, it has been compared with gold because of the clear upper limit of the total amount and its strong value storage capacity, and it has been titled “Digital Gold”. However, the extremely high price volatility of Bitcoin has been rejected by traditional financial markets. But in recent years, the effect of Bitcoin “safe haven” has begun to show up. Krugman, the Nobel laureate in economics, once said that bitcoin is more practical than gold and "and may be more valuable in the future."

Some institutional studies have found that although the correlation between Bitcoin and gold has not been stable since 2015, since the beginning of June this year, the positive correlation between the two has been very alarming, and the correlation coefficient between the two in just two months. Since -0.6 飙 rose to above 0.8, the correlation coefficient hit a new high in nearly four years. In addition, there are indications that some funds pursuing safety have begun to re-examine the safe-haven functions of gold. When the market once again sounded the alarm of uncertainty, the safe-haven funds that should have entered gold have continued to flow into Bitcoin in the near future.

Market participants stressed that the only thing that can affect the price fluctuation of Bitcoin is the regulatory policies of countries on encrypted digital currency. With the gradual development and improvement of blockchain technology and encrypted digital currency, governments have gradually Shows a positive attitude of accepting tolerance and discussion.

Since the beginning of this year, the encryption of digital currency based on blockchain technology has become a hot topic worldwide. Facebook has announced the launch of the Libra Encrypted Digital Money Program, which is the ultimate in this craze. In early August, the US Patent and Trademark Office disclosed documents that another commercial giant Wal-Mart was applying for digital cryptocurrency patents.

Blockchain commercial application first year

In addition to commercial institutions, multinational central banks including the Bank of England, the Bank of Canada and the Swedish Central Bank are also conducting research and development on legal digital currencies. The International Monetary Fund (IMF) is also rumored to be studying the feasibility of launching the global digital currency IMFCoin under the Special Drawing Rights (SDR) mechanism. IMF acting president Lipton said recently that the digital currency boom should balance opportunities and risks, and neither miss too many opportunities nor ignore risks. These financial innovations can bring "like things that the Internet brings to information" to make transactions real-time, cheap, and secure, and may lead to greater financial inclusion.

China's research and development of legal digital currency also started a few years ago. In order to promote the research and development of digital currency, the Central Bank Digital Currency Research Institute was also established. On the occasion of the video conference held in the second half of 2019 held on August 2, the People's Bank of China will make arrangements for the key tasks in the second half of the year. One of the eight key tasks to be done in the second half of the year is to develop financial technology and strengthen tracking. Research and actively meet new challenges. Accelerate the pace of research and development of China's legal digital currency (DC/EP), track and study the development trend of virtual currency at home and abroad, and continue to strengthen Internet financial risk remediation.

Guohai Securities believes that the central bank’s proposal to promote China’s digital currency research and development, or to fight for future initiatives, will bring catalysis to the blockchain sector. 2019 will be the first year of commercial application of blockchain. First, blockchain technology has matured in terms of performance, ease of use, and operability, and can support large-scale commercial applications. Second, blockchain laws, regulations, and regulatory systems are gradually improved. This filing is beneficial to blockchain. The overall development of the industry is the first step in the standardization of blockchain technology. More and more enterprises can apply in a formal way. I am optimistic about the blockchain first in the supply chain finance, copyright protection, legal deposits and other aspects of the application of outbreaks, optimistic about the independent and controllable blockchain platform technology service providers.

China Merchants Securities pointed out that the blockchain has already stepped out of the bubble stage in the early stage of the industry, and the application scenario has gradually begun to fall. Due to the value of the blockchain as a trusted infrastructure, financial institutions, technology companies, and regulatory authorities around the world have always paid close attention to the development opportunities of the blockchain industry. In the future, once the business model is large-scale, it is expected to grow rapidly based on the platform and ecology. Formed the trend of early Internet index growth.

Source: China Securities Journal

Author: CHEN Xiao-gang