China’s national currency, the yuan, is slipping in price, and it looks like the currency’s downfall could be good for bitcoin.
As the Yuan Heads Down, BTC Moves Up
The currency fell by about 7.16 percent against the U.S. dollar on Tuesday. This is the yuan’s lowest numbers since last September, and the decline is only slated to get worse. In the past, every time the yuan has slipped into red territory, bitcoin has swiftly moved up, meaning that if this trend continues in any way, we could likely see bitcoin excel and reach unprecedented numbers.
Turmoil has spread throughout China these past few weeks, with President Donald J. Trump requesting that the country offer financial compensation to the United States due to COVID-related damage to the country’s economy. In addition, the country is witnessing further protests in Hong Kong following further work to implement new security laws. These laws invoke penalties of more than $50K USD and three years in prison.
The U.S. has also stated that the new security laws are unconstitutional and infiltrate user privacy. As people in Hong Kong protest Beijing’s growing interference, Senator Marco Rubio has put out a tweet condemning China’s actions and claiming that the U.S. will impose sanctions on the eastern nation granted the latest security bill goes through.
Chris Burniske – partner at venture capital firm Placeholder – explained on Twitter how the situation could wind up pushing bitcoin further into green territory. He writes:
If China’s CNY continues to weaken against USD, then we could have a 2015 and 2016 repeat where BTC strength coincided with yuan weakness.
Already, the cryptocurrency seems to be getting stronger. The asset ultimately dropped into the high $8,000 range over the past few days, meandering between $8,800 and $8,900, though at the time of writing, the world’s biggest digital currency by market cap has moved beyond the $9,000 mark yet again to trade at around $9,126.
But things don’t quite stop here for bitcoin. The asset’s agenda has ultimately been pushed by the recent economic strife brought on by the coronavirus. So much so, that analysts with Messari.io are now referring to bitcoin as a “macro asset.” The time has allegedly come to view bitcoin as a potential tool for healing the global economy and providing much-needed financial services.
Bitcoin Is Much Better Off
In a newsletter, Messari.io explains:
It’s no longer possible to analyze the crypto market without analyzing the rest of the macro markets. The 2020 recession officially marks the beginning of bitcoin as a macro asset class. For retail investors and institutional investors, crypto isn’t the only asset class in their portfolio. Therefore, it’s crucial to look at crypto from a portfolio allocation perspective.
Now that China is officially releasing a digital version of the yuan, it’s unclear if the currency’s weakened state will continue.