Yuan's depreciation appears to be pushing up price of Bitcoin
BITCOIN has reached a record inverse relationship with the Chinese currency, according to a Bloomberg analysis of their 30-day correlation
BITCOIN has reached a record inverse relationship with the Chinese currency, according to a Bloomberg analysis of their 30-day correlation. The strengthening of the world's most popular digital coin implies it may have become a refuge for people hedging the yuan's depreciation.
'There's corroborating evidence for this, in that people in Asia were paying more for Bitcoin than elsewhere when the yuan fell,' said Blockchain.com's research director Garrick Hileman, reported Bloomberg.
'You can see it in the premium price paid sometimes for Bitcoin in exchanges like Huobi that primarily cater to Chinese.'
Speculation on the China effect has evolved around factors that are weakening the yuan, from the US-China trade war to China's slowing economy. It also has included a court ruling in July stating Bitcoin is a virtual asset protected by Chinese laws, the first time any local court has delivered such a verdict, according to state media reports.
The inverse correlation 'became more evident also in April and May, and as the tensions ratcheted up with the deterioration on US-China trade relations,' Mr Hileman said.
For years, the question of what moves Bitcoin's price day to day has eluded enthusiasts, investors and Wall Street financial engineers who have started establishing futures and trusts on the world's best-known private money to make it easier to trade. Its anonymous ownership and unregulated nature have kept the identity of big movers and shakers largely in the dark.
The size of the inverse movement is of the order of gold versus Brent crude-oil futures, where the precious metal tends to rise when the most-traded commodity is contracting.
Since 2017, Beijing has closed down all China-based crypto exchanges and banned crypto-related crowdfunding schemes from targeting local customers. The People's Bank of China is looking to launch its own digital currency, a move designed to give Beijing have better control of its financial system.