Last year, one of the biggest narratives in the Bitcoin market was that tensions between China and the U.S. — which culminated in a massive trade war — was pushing cryptocurrencies higher.
Whenever President Donald Trump tweeted about U.S. relations with China, BTC responded, both rising and falling with the geopolitical trends. Once, when Trump announced that tariffs would be applied to billions worth of Chinese goods, both Bitcoin and the U.S. dollar against the Chinese yuan jumped in tandem.
With the Chinese yuan starting to underperform, the narrative that geopolitical tensions are influencing the Bitcoin price has begun to be mentioned once again.
Although U.S.-China relations were back on the mend heading into the last quarter of 2019, it is once again getting heated between the two world superpowers.
Responding to the record Hong Kong protests last year, the mainland Chinese government is looking to a stringent security law on the region. The U.S., which designates Hong Kong as a special economic zone due to its status as the most democratic Chinese city, has retaliated.
Trump that he and Washington would react “very strongly” should the law pass, with
The Chinese yuan, as such, has sunk, breaking out of resistance as prominent Bitcoin investor and crypto executive Matt D’Souza depicted in the chart below.
Chart of USD/CNY trading pair from Matt D’Souza, CEO of Blockware Solutions and Blockware Mining and a prominent Bitcoin investor.
Adding to the pressure against the yuan, the U.S. has begun to increase its pressure against China over its handling of COVID-19, with some members of government China of in the handling of the outbreak.
Boost to Bitcoin
Analysts say that this could be a boost to Bitcoin. Chris Burniske, a partner at Placeholder Capital, explained:
“If China’s CNY continues to weaken against USD, then we could have a 2015 and 2016 repeat, where BTC strength coincided with yuan weakness.”
If China's continues to weaken against , then we could have a 2015 and 2016 repeat (pictured below), where strength coincided with yuan weakness.
— Chris Burniske (@cburniske)
Considering that there is a that Bitcoin is a hedge and valid investment for the Chinese, this could very well be the case. BTC rallying on yuan weakness would also echo what we saw last year.
Far From the Only Macro Factor Boosting BTC
A falling Chinese yuan isn’t the only macroeconomic factor that analysts say will (or has) boost Bitcoin in the current times.
To respond to the COVID-19 outbreak, governments and their central bank counterparts around the world have been forced to spring into action. They have injected $20 trillion worth of stimulus (denominated in USD) into the global economy, estimates suggest.
I am a writer who has been following Bitcoin for years now. My insights and interviews have been featured in leading publications in the industry such as LongHash and Decrypt. I own a small amount of Bitcoin.
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