The market has often been filled with reports discussing how the value of traditional currencies could have an impact on the price of bitcoin and other digital currencies. A recent event shows a stronger link in this regard, as while the bitcoin managed to hit its 3-months-high, the Chinese Yuan is weakening considerably.
To put things better into perspective, the Chinese Yuan is dealing with a six-year low, and Chinese investors are turning to other forms of alternative assets to move away from the weakening national currency.
At this time, the boost of price that bitcoin is dealing with, actually concurs with another wave of yuan weakness in China, which is used for around 90% of the trading in the region. There are capital controls that limit the amount of cash that Chinese citizens can take abroad, thus making them unable to invest in other assets that would otherwise bring them more yuan. In fact, since August 2015 when the yuan fell by a large percentage worth of its value, China has made it quite difficult for money to be taken out of the country. It’s important to keep in mind that at that moment in time, the yuan managed to reach a 2015 high of $777 after increasing by over 80% in value, as tens of thousands of Chinese investors started seeing the coin as a must-have asset. Because of this, Chinese traders are taking closer and closer looks at the world of digital currencies and the possibilities that it offers.
Not only this, but the recent rise in the price proves that the digital currency’s value was strongly affected by the Bitfinex hack, carried out back in August, when a total of $72 million worth of bitcoin were stolen.
According to the Beijing-based chief operating officer of Huobi, “As the yuan enters a path of depreciation, investors will consider investing in assets that can preserve value and hedge risks”. Other investors believe that bitcoin has the possibility to reach the $1,000 mark this winter, as the Chinese yuan continues to fall, without recovering back up.
Based on everything that has been outlined so far, strict Chinese capital controls have the potential of encouraging more investors to take a closer look at bitcoin and its possibilities, while also increasing the overall value of the digital currency. What do you personally think about the link between the value of the Chinese yuan, and the value of Bitcoin? Let us know your thoughts in the comment section below.