Thursday, August 22, the yuan fell 0.2% to 7,00749 per U.S. dollar. Prior to that, he has long been in the spotlight because of the ongoing trade wars and accusations the US of currency manipulation. Earlier this month legal tender maximally weakened and dropped below 7 units per dollar for the first time since the financial crisis. This event caused a global market shudder.
The weakening of the yuan earlier coincided with an increase in volume of bitcoins traded on mainland China. From 4 to 14 August, it increased by about 50% (according to a Hong Kong company cryptoviruses Babel Finance). Analysts believe that the price and trading volume of bitcoin in these ten days has increased due to the people’s Bank of China. It was reported that the Central Bank weakened the yuan, forcing investors to turn to the attractive asset-shelters, including bitcoin.
Bitcoin and the yuan falling in tandem
Now, unlike in the past, bitcoin is dropping, despite the fact that I was surrounded by positive macroeconomic catalysts. The leading cryptocurrency had lost this week more than $1200 at a time – mainly because investors expected results of the meeting of world Central bankers in Kansas, which starts today.
In conclusion of the meeting by the Chairman of the fed Jerome Powell, who will speak on the theme of a slowing global economy. Investors expect him to announce a series of new programs of stimulation of economy. Meanwhile, bitcoin is waiting on the sidelines until the big market players are coming forward.
Therefore, the falling yuan seems to be the reason for the rehabilitation of the cryptocurrency. Enthusiasts of the cryptocurrency say that investors in mainland China are choosing bitcoin as a safe-haven asset, seeking to circumvent state-imposed capital controls. Bitcoin is non-sovereign asset, operating through a distributed network of miners around the world. The Chinese authorities do not know how to close it.
“Falling Renminbi raises serious use case for cryptocurrency, says the Taymūr Berg, chief economist at the Singapore branch DBS – now this phenomenon, which is monitored by the markets.”
The tunnel or the destination?
Analysts are still not sure, how does the bitcoin as a tunnel or as a destination when we are talking about the way the Chinese remit funds abroad. According to experts of company of new York Grayscale Investments, bitcoin may be the answer to crises of liquidity into the ailing markets, so the possibility of its adoption in the long term is high.
“Although the life cycle of bitcoin as an asset suitable for investment, has just begun, we’ve revealed the facts confirming that it is a method of protecting the value of investments in the global liquidity crisis, especially if such a crisis leads to a devaluation of the currency,” the company wrote in the June report.