- As the Chinese yuan weakens amid economic tension, Chinese investors turn to Bitcoin as a hedge and wealth preservation tool.
- Historical yuan devaluations in 2013, 2015, and 2019 were followed by Bitcoin surges driven by capital flight from China.
- Ongoing U.S.-China tensions and yuan volatility may start another wave of Bitcoin demand as investors seek decentralized safe havens.
In his X post, BitMEX co-founder Arthur Hayes suggests that the People’s Bank of China might help Bitcoin in a roundabout way. He contends that capital flight into Bitcoin is frequently triggered by a weaker Chinese yuan (CNY). In the past, Bitcoin experienced significant increases after comparable devaluations in 2013 and 2015.
Yuan Devaluation and Bitcoin Correlation
At 7.3472, the USD/CNH exchange rate increased by 1.67% in the previous month. Market trends indicate a strong decline in early April, a resurgence to 7.35, and a continuous upward trend in late March. This pattern suggests volatility, driven by increased buying activity and economic uncertainty.
Ben Zhou, Bybit’s CEO, claims China may weaken the yuan to counter U.S. tariffs. In response, Chinese investors often shift funds into Bitcoin. Historically, yuan depreciation aligned with Bitcoin price hikes. When the yuan dropped nearly 2% in August 2015, Bitcoin saw increased interest. Similarly, in August 2019, as the yuan broke the 7:1 ratio against the USD, Bitcoin surged 20% in a week.
Geopolitical Tensions and Crypto as a Safe Haven
The United States and China are increasingly tense. China threatened retaliation when the U.S. president leveled huge tariffs. Investors seek other assets as a result of such actions, which further increase financial instability.
The asset manager Grayscale previously stated that increasing Bitcoin demand was due to the fall of the yuan. Wealthy individuals from China have generally used crypto to escape capital restrictions, safeguard their wealth, and keep it private.
Additionally, it comes to investors to turn into an asset that would control the reduced trust in the central banks due to higher inflation in fiat currencies. Additionally, because it is decentralized, Bitcoin is a desirable hedge against currency deflation.
As a result, Bitcoin may see another surge if the yuan continues to decline. Historical data suggest that yuan devaluations often correlate with Bitcoin surges. Furthermore, If China devalues its currency again, Bitcoin could see a strong upward trend in 2025.
