Bitcoin Price Crosses US$1,000, Up 140% YTD

Multiple catalysts drove the run. Chinese restrictions on capital flight paired with yuan weakness pulled in investors seeking shelter. The yuan fell 6.6% against the dollar over the year, the steepest decline since 1994, according to the South China Morning Post. Chinese buyers viewed bitcoin as an alternative when their government tightened control over what money could leave the country.

India's abrupt removal of large-denomination rupee notes in November also boosted demand for bitcoin. Zebpay, a major Indian exchange, reported a 25% jump in monthly trading volume that month while adding 50,000 users. Venezuela presented another case. The bolivar plunged 70%, reaching about 3,100 per dollar, as inflation approached 500%. Venezuelans turned to bitcoin as their government imposed currency controls and the bolivar sank. LocalBitcoins, an over-the-counter trading platform, recorded a spike to 376 bitcoins traded in the week of October 15—a measure of the desperation among locals seeking an exit.

Donald Trump's presidential victory in November added another boost. Bitcoin jumped 5% in the 24 hours after election night. Saxo Bank, a Denmark-based institution, predicted the price could rise another 165% through 2017, betting that Trump's "spending binge" would weaken the dollar. Kay Van Petersen, the bank's global macro strategist, explained the reasoning: "Cryptocurrencies are here to stay given the history of booms and busts in fiat money and debt excesses. Bitcoin as the face of cryptocurrencies benefits from this chaos. Emerging market powers eager to move away from being tied to the monetary policy of the US and the banking system as well as to adopt the blockchain as a payment system prove willing adherents as they adjust to zero interest rates and the decrease in systematic risk."

Bitcoin's technical fundamentals shifted this year. In July, the system cut its block reward in half for the second time in its history, reducing the payment miners receive to 12.5 bitcoins per block. The next halving occurs in July 2020.