Question: What do indium and Bitcoin have in common?
Answer: Prices for both are being driven by speculative buying in China.
While indium prices may not be up 1000 percent over the past six months, they have risen 30 percent since April, a remarkable run considering that many still believe the market is in oversupply.
The correlation between Bitcoin and indium prices may be explained by the suppressed investment environment in China.
In a country flush with cash, where capital controls restrict overseas investment and the government sets interest rates below the rate of inflation, individuals are desperately searching for alternative investment opportunities. The Fanya Metal Exchange and Bitcoin are just two opportunities, among many, that have moved into this void and been sold to investors not knowing where else to put their renminbi.
Since mid-October, the Fanya Metal Exchange has increased its published indium holdings from 1600 tons to 1800 tons, forcing the spot indium market to react.
During the same period - so I am told - China has taken over the market for Bitcoin, with accounts registered on the mainland accounting for over 80% of all purchases of the cryptocurrency.
Indium prices, much like Bitcoin prices, are now reflecting the psychology of speculative investors as well as the industrial market value of the metal. This has left producers, traders and end-users on a knife-edge when it comes to budgeting and managing spot purchases and inventory loads.
Prices for 99.99% indium moved upwards again this week after doubts about the ability of Fanya to continue driving prices had lulled the market earlier this month.
Image courtesy of Metal-pages.com
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