China eased the grip of Yuan (CNY) on Tuesday, so it could be written off beyond a key level, probably in response to President Donald Trump’s aggressive customs.
Crypto analysts expect Yuan’s depreciation to favor Bitcoin (BTC) and draw parallels to similar events from a decade ago.
Early Tuesday, People’s Bank of China (PBOC) set the so-called daily yuan fix to 7,2038 per Dollar on Tuesday, the weakest since September. Yuan is not a free float currency such as USD, Euro and other G-7 nations and are allowed to trade in a range of 2% on each side of the daily fix announced at. 9:15 Beijing Time.
7.2 level has been considered a “harder line in the sand” for the central bank for years. The USD/CNY pair have traded above the said level a few times since 2022, but never established a foothold.
It can be changed with PBOC explicitly to set the daily centerpiece beyond the 7.2 level. In other words, the move signals a shift to the controlled depreciation of yuan, which will help keep China’s export cheaper and competitive, which potentially offsets the negative impact of Trump’s customs on Chinese goods.
Capital flight to BTC?
The controlled depreciation could also trigger capital flights from China, which can find homes in Cryptocurrencies, according to analysts.
“The United States is now pursuing full-scale financial pressure on China, which may be forced to respond with quantitative easing and a currency accordance. If that’s the case and if China allows capital flight-spoken Bitcoin wave, just as it did in 2015,” Markus Thielen, founder of 10x research, said in a note to clients on Monday.
Chinese central bank devalued Yuan by 1.9% on August 11, 2015, the most significant one-day depreciation for over two decades and sent shock waves across the global financial markets. Bitcoin originally fell over 20% with US stocks, but quickly got higher and rose almost 60% in the following four months.
Ben Zhou, CEO and founder of Crypto Exchange Bybit, expressed a similar statement about X and said yuan depreciation tends to bark well for Bitcoin.
“China will try to lower RMB to counter the tariff historically when RMB falls, a lot of Chinese capital flow to BTC, Bullish for BTC,” Zhou said at X.
Legislative obstacles
While the story asks us to expect a bullish BTC reaction to the yuan depreciation, you should note that over the years, China has become anti-crypto, with reference to the risk of financial stability and has some of the world’s toughest rules.
A new regulation announced earlier this year requires banks to monitor and report suspicious international transactions, including those involving cryptocurrency. The banks are required to investigate and report any risky crypto trader, which may result in financial restrictions and potential black list for the trader.
The strict attitude means that local dealers can have a hard time diversifying to Bitcoin and other digital assets in the event of a sustained yuan depreciation.
“Since August 2024, Supreme People’s Court has significantly increased the legal risks of individuals using cryptocurrencies in connection with money laundering, which could easily expand to capital flight cases,” Thielen said. “This presents a major deterrent, despite rising financial uncertainty.”
