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After a near-death experience last year, bitcoin prices jumped again in recent days after Beijing loosened rules which will allow ‘‘mum and dad” investors to trade crypto inside the Special Administrative Region of Hong Kong.Ostensibly, the announcement is part of a move to make Hong Kong a “crypto hub”. But it also implies a U-turn on as China had recently banned crypto trading – and mining.Moreover, China’s pro-crypto move comes as US Republican presidential candidate Ron DeSantis widened a Congress split on the issue. He suggested US Democrats were trying to “regulate crypto out of existence”.In contrast, the Biden administration remains firmly against the sector, while Senator Elizabeth Warren is launching an “anti-crypto army”.Against this backdrop China has launched a two-pronged strategy in crypto with Beijing releasing a white paper on digital assets in the same week as the Hong Kong initiative.As Paul Hewson, the digital lead at KordaMentha, explains: “China may well be using the moment to take advantage of a split in the US on the future of crypto. The Hong Kong announcement is a chance to try out something in a limited way.”Hewson recently worked on the voluntary administration of collapsed crypto exchange FTX’s interests in Australia. He suggests: “China is well advanced in this area, especially in relation to a central bank currency.”The latest wave of support for crypto brought bitcoin prices to a two-week high on Monday above $US28,000. In Australian dollars bitcoin – at $42,810 – has now gained more than 75 per cent since the beginning of the year.For most investors crypto remains at best a speculative sideline, and at worst a dangerous investment category awash with scam activity. In fact, a UK House of Commons Treasury committee has just concluded bitcoin and its cousins tether, ethereum, etc, have no intrinsic worth and should be classified as pure gambling for tax purposes.As the infighting around the future of crypto continues, enthusiasts read the ruckus as a revival.At Australian crypto exchange Swyftx, head of product strategy Tommy Honan says bitcoin prices have responded to a string of macro triggers in recent days including a move to “risk assets” after the US did a deal on its debt ceiling arrangements. “Trading volumes are about four times higher than they were during the worst of the downturn, though we are still perhaps only at one-sixth of the levels we enjoyed at the peak of the recent cycle,” he says.As China triggers a reassessment of crypto, the sector is also getting a boost from the mania around AI stocks typified by the doubling in the price of chip giant Nvidia, which is close to becoming the newest $US1 trillion stock.Crypto traders have flocked to AI-linked tokens such as Agix and Fet in recent months using these crypto products as a proxy for the bull run enjoyed by AI- linked stocks on global markets.Where to from here? Inside the sector the move from China is seen as promising. “China’s acceptance of crypto could stimulate global demand, boost prices, and potentially lead to wider acceptance of digital currencies,” says Cryptoticker.com.But Honan is cautious: “We have seen Beijing change its mind on Crytpo more than once. What’s happening in Hong Kong is that they are testing the water … we’ll see where it goes from here.”The Money Puzzle
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