The narrative about the Chinese buying up Bitcoin is flowing two ways – some reports say that the Chinese are turning to the cryptocurrency because of the FUD created by the US-China trade war, while others indicate that the Chinese are not buying up crypto. An article by Nikkei Asian Review highlights that China’s central bank may be pushing the demand for Bitcoin after all.
PBOC’s Currency Devaluation Driving the Demand for Bitcoin
According to the article, an expert at an informal bitcoin association in China has revealed that the volume of Bitcoin and other cryptocurrency purchases has grown by as much as 50%, though there is no solid evidence supporting this claim.
It is to be capital outflows in the country have been on the rise. In the first quarter of the year, errors and omissions deficit in the balance of payments stood at $88 million, and among the reasons for this is capital outflows. Crypto is being seen as a major channel to where the money is flowing.
Among the reasons responsible for such capital outflows is the policies adopted by the People’s Bank of China (PBoC) to combat the loss of exports and those have caused severe currency devaluation in the last few weeks. On August 5, PBoC set the yuan’s daily reference rate below 7 per dollar, a first for the yuan in nearly a decade. This created FUD among the people and the people, and they apparently flocked to the “safe haven” bitcoin.
Analysts and Influencers’ Take on Trade Wars and Bitcoin price
Several crypto-influencers and analysts have also posited that Bitcoin has become a safe-haven asset in these times of global financial FUD, most notably caused by the US-China trade wars.
Grayscale Investments, a prominent authorized trust for digital currencies in the US attributes 75% of 2019 Bitcoin gains to the US-China trade war.
Recently, Bitcoin bull Tom Lee also affirmed Bitcoin’s status as a safe haven status by stating that it is “positively correlated to gold” and has proved “itself this year to be a hedge against global risks” on CNBC’s Fast Money.
DailyFX’s senior currency strategist Christopher Vecchio also pointed to the fact that the price of Bitcoin has been inversely proportional to the yuan since the trade war between the US and China started in an interview on Kitco.
A week ago, the Mati Greenspan, senior Market Analyst at eToro also suggested that the price of Bitcoin and the trade wars are correlated. He said –
“Even though correlation does not equal causation and we still don’t have enough data, it’s difficult to ignore the coincidence that bitcoin rose sharply in May and June while the US and China trade tensions were at their height. Today, once again we see the tension rising between the world’s two largest economies and Bitcoin is on a firm footing.”
However, not all crypto-influencers are convinced that the trade-wars and consequence yuan devaluation are pushing the Chinese to buy bitcoin. On August 5, the day of the severe yuan devaluation, crypto influencer Dovey Wan had tweeted –
“Chinese buying up Bitcoin” is a VERY dubious narrative IMO
Bitcoin is trading at a negative premium in Chinese centric exchanges like Huobi and Okex
RMB denominated OTC price is now at 1% premium, within its normal range since the bull”
Peter Schiff, Bitcoin skeptic and gold maximalist had also slammed the Chinese buying up Bitcoin narrative by saying that the Chinese weren’t buying Bitcoin as a safe haven, but speculators were buying it in the hope that the Chinese will buy it as a safe haven.
There is no conclusive evidence to prove the correctness of either of the two narratives.
But, in this time when the world is a global village are the effects of the events in one part of the world are likely not to remain localized and FUD goes beyond borders. Also, politico-economic uncertainty in different forms is affecting other parts of the world too – the upcoming Brexit is the cause of FUD for the people of the UK and EU. Hyperinflation has spawned great tribulations in countries including Venezuela, Zimbabwe, Argentina and Iran.
When the global economy is in such a troubled state, it is not surprising for Bitcoin to get recognised as a safe haven asset, non-correlated with government-issued currencies or policies.
The post Is China’s Central Bank Pushing the Demand for Bitcoin in the Country? appeared first on Coingape.