By CCN.com: Bitcoin is on a tear as the price of the flagship cryptocurrency has gone supersonic in 2019. It is widely believed that bitcoin’s remarkable rally is a result of booming institutional interest in the cryptocurrency, as investors are looking for alternative asset classes to park their funds at a time when the stock market is in turmoil and the global economy is on edge.
But it looks like institutional buying isn’t the only catalyst driving bitcoin’s price. The Chinese are reportedly piling into bitcoin, believing it to be a safe investment at a time when the yuan is taking a hit thanks to the U.S.-China trade war.
China Suddenly Loves Bitcoin
The Chinese government has a hostile approach toward bitcoin, delivering blow after blow to the cryptocurrency industry in general. From shuttering exchanges to outlawing ICOs and considering a ban on mining activities, the Chinese government has made it clear that it doesn’t love crypto.
But the Chinese people are counting on bitcoin a time when the yuan is crumbling under the pressure of the trade war.
The yuan suffered its steepest single-day drop since last July after China announced that it will impose tariffs in the range of 5% to 25% on $60 billion worth of U.S. goods. Analysts believe that the Chinese are dumping the yuan in favor of BTC.
According to David Cheetham, the chief market analyst at trading platform XTB cited in Yahoo Finance:
“Rather than investors seeking out inherently risky assets as safe havens, a more likely explanation is the recent drop in the Chinese yuan and the expectation of a further depreciation when Beijing seeks to make exports more attractive in response to the latest round of U.S. tariffs.”
Dovey Wan, who is the co-founder of crypto holding firm Primitive Ventures, has a similar view.
Traders Confirm the Chinese Are Buying Crypto
The Chinese government has stringent measures in place to prevent the dumping of yuan, limiting the yuan’s outflow to just $50,000 a year.
But bitcoin gives them a way to circumvent that limit despite a ban on cryptocurrency exchanges, with the help of over-the-counter dealers and peer-to-peer exchanges such as LocalBitcoins.
According to Philippe Bekhazi, CEO of crypto trading firm XBTO cited in Forbes:
“I’ve talked to a bunch of traders on the ground in Hong Kong. There’s a booming business in stablecoins because people are getting money out of China and Hong Kong.”
Not surprisingly, weekly bitcoin volumes on LocalBitcoins have spiked. In March, China was the fifth-largest country in terms of bitcoin volumes on the peer-to-peer platform. What’s more, a closer look indicates that Chinese bitcoin buying on LocalBitcoins has gathered pace in recent weeks.
If the U.S.-China trade war takes a turn for the worse, the price of bitcoin can spike further and possibly reclaim the peak $20,000 level once again.
Last modified: March 4, 2021 2:31 PM