In the quickly changing landscape that is bitcoin trading, it is wise to keep a close on eye on as many indicators pointing to future bitcoin prices as possible. Some of these indicators provide us with hints and clues while others seem to give a lot more than that. Currently, it seems that looking at the price of the Yuan against the dollar is one of the latter – that is, if past price action repeats itself.
On several occasions, Bitcoin has surged at the same times the Yuan has lost value. And, while there is still reason to question a direct link between the relative strength of the Yuan and Bitcoin, there is also plenty of reason to keep on eye on the Yuan’s devaluation, just in case the correlation between the two is, in fact, an indicator of higher prices for Bitcoin.
Earlier this week, the Yuan suffered a slip in value that has devalued the Chinese currency by nearly 1.5% since the beginning of the month, and more than double that figure since the beginning of the year. The Yuan is now trading at 8-month lows while Bitcoin seems to be gaining traction.
China’s currency losing value may have something to do with recent turbulence with the US and its threats to sanction the country in response to its recent moves to restrict life in Hong Kong, as similar political moves in the past have had a similar effect on the Yuan’s strength.
Previous Correlation Between Bitcoin and Yuan
Historically, we have seen the relationship between a weakened Yuan and stronger Bitcoin on three distinct occasions: in 2015, 2016, and then again in 2019.
In 2015 and 2016, the price correlation was very close, with charts appearing almost identical between the two. In 2015, China’s currency fell by more than 5% throughout the course of the year while BTC soared to levels above the 30% mark. Similarly, in 2016 when the Yuan lost more than 7% of its value against the USD, the world witnessed Bitcoin prices increasing to nearly 125%.
The relationship between the Yuan and BTC is interesting but whether one has a direct effect on the other remains to be seen.
One working theory suggests that as China’s currency slips, many Chinese nationals move their assets into Bitcoin as a way to protect their investments. It is an idea that many are increasingly convinced of, especially seeing as how the timing between the price action for the two assets are so closely linked to one another.
If the coming months prove to play out as many are expecting – with the Yuan slipping to new lows while Bitcoin’s value increases, the link between the two would become even more cemented into the minds of many analysts.
All with all things related to Bitcoin, the possible connection between the Chinese Yuan and BTC prices is interesting but should be considered in correlation with other indicators as well. While there may indeed be a connection to speak of, we also have to look at other factors driving Bitcoin prices, such as growing institutional involvement in the cryptocurrency, and exploding derivatives market, and an expected increase in value as a result of the effects of the recent halving event. This possible indicator between China’s currency and Bitcoin is yet another box to take when cross-referencing data related to Bitcoin price speculation.