This week, the Chinese yuan has devalued to a four-year low against the U.S. dollar while BTC/CNY echange rate has risen from 1,633 yuan to 1,690.36 yuan. Is the devaluation of the Chinese yuan triggering a surge of bitcoin growth in China?
"Generally, if bitcoin behaved like other commodities, it would decline in price with the devaluation of the Chinese yuan, since BTC would be more expensive in CNY terms, which would reduce overall market demand," Greg Wolfson of BTCChina told Bitcoin Magazine. "In fact, for the past five years, we've seen a strong bear market in commodities, and part of that trend is driven by structural changes in China. Bitcoin prices have also declined over the same period, although it hasn't been shown that this is correlated with traditional commodity indices."
However, there are quite a few people in China who are enthusiastic about bitcoin and think of the digital currency as a stable alternative to the Chinese yuan. Some businesses purchase bitcoin due to its relatively high international exchange rates and to avoid times of economic uncertainty.
"The CNY devaluation is significant as a policy signal, but the actual devaluation wasn't very large in relative terms," Wolfson said. "However, there are a growing number of people who feel that bitcoin is a safe haven of sorts, analogous to the role that gold played historically. If this is true, economic turmoil in China could cause speculators and perhaps some businesses to buy more bitcoin in a 'flight to safety.' Bitcoin has some properties that make it attractive during times of economic uncertainty, and uncertainty in Chinese stock markets, foreign exchange rates, and the overall economy could create more demand for bitcoin and buoy prices."