Yuan Hits Lowest Level Since September: Crypto Analysts Eye BTC as Safe Haven
On Tuesday, China relaxed its control over the yuan (CNY), allowing it to fall past a critical threshold, perhaps in reaction to President Donald Trump’s punitive tariffs. Nevertheless, cryptocurrency analysts predict that the yuan’s decline may benefit Bitcoin (BTC), citing comparable circumstances from ten years ago.
Early on Tuesday, the People’s Bank of China (PBOC) fixed the so-called daily yuan fix at its lowest level since September, at 7.2038 per dollar. Unlike the USD, euro, and other G-7 currencies, the yuan has no free float and can fluctuate by 2% on either side of the daily fix, which is announced at 9:15 a.m. Beijing time.
Could a Weaker Yuan Spark a Crypto Rally? Analysts Think So
For years, it has been believed that the central bank’s hard line in the sand is the 7.2 level. Since 2022, the USD/CNY pair has occasionally traded above the aforementioned threshold but has never taken root. If the PBOC specifically sets the daily midpoint over the 7.2 level, it could alter the situation. Stated differently, the action marks a change to controlled yuan depreciation. It will help maintain the competitiveness and affordability of China’s exports, which could counteract the adverse effects of Trump’s tariffs on Chinese goods. Analysts predict that the controlled depreciation may also lead to a flood of Chinese capital, which could end up in cryptocurrency.
The U.S. is now pursuing full-scale economic pressure on China, which may be forced to respond with quantitative easing and a currency devaluation. If so—and if China permits capital flight—Bitcoin could surge, much like it did in 2015,
Markus Thielen, founder of 10x Research
Will Bitcoin Benefit from a Yuan Drop?
Although history suggests that yuan devaluation often triggers a bullish response in Bitcoin, the current environment may differ. China has become increasingly anti-crypto over time, enforcing some of the world’s strictest regulations due to concerns about financial stability. Banks are required under a new rule that was unveiled earlier this year to keep an eye on and report any questionable foreign transactions, including cryptocurrency transactions.
Risky cryptocurrency trades must be looked into and reported by banks, which could lead to financial limitations and perhaps the trader’s blacklisting. In the event of a prolonged devaluation of the yuan, local traders may find it difficult to diversify into Bitcoin and other digital assets due to the strict stance.
Since August 2024, the Supreme People’s Court has significantly increased the legal risks for individuals using cryptocurrencies in connection with money laundering, which could easily extend to cases of capital flight. This presents a major deterrent, despite rising economic uncertainty.
Thielen
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