Last year, one of the biggest stories in the Bitcoin market was that tensions between China and the US – which culminated in a massive trade war – fueled cryptocurrencies.
Whenever President Donald Trump tweeted about US relations with China, BTC reacted, both rising and falling with geopolitical trends. Once Trump announced that the tariffs would be applied to billions of Chinese goods, both Bitcoin and the US dollar pitted against the Chinese yuan.
Now that the Chinese yuan is performing less well, the story of geopolitical tensions affecting the Bitcoin price is beginning to be mentioned again.
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The Chinese Yuan is faltering
Although relations between the US and China were recovering again towards the last quarter of 2019, it is heating up again between the world’s two superpowers.
In response to record protests in Hong Kong last year, the Chinese government is looking to the mainland impose a strict security law in the region. Designating Hong Kong as a special economic zone for its status as the most democratic Chinese city, the United States has retaliated.
Trump said that he and Washington would respond “very strongly” if the law passed, with others in government and around the world respond in the same way.
The Chinese yuan has sunk as such and breaks out of the resistance as prominent Bitcoin investor and crypto performer Matt D’Souza depicted in the chart below.
In addition to pressure against the yuan, the US has started to increase pressure against China on the way it handles COVID-19, with some government members accusing China from complacent in the treatment of the outbreak.
Boost to Bitcoin
Analysts say this could boost Bitcoin. Chris Burniske, a partner at Placeholder Capital, explained:
“If China’s CNY continues to weaken against the USD, we could have a repeat of 2015 and 2016, where BTC strength coincided with the weakness of the yuan.”
If China is $ CNY continues to weaken against $ USD, then we could have a repeat of 2015 and 2016 (shown below), where $ BTC strength coincided with yuan weakness. https://t.co/ISVJAZMX5O pic.twitter.com/VApfxe1SFw
– Chris Burniske (@cburniske) May 22, 2020
Given that there is one sentiment that Bitcoin is a hedge and valid investment for the Chinese, this could very well be the case. BTC rally over the weakness of the yuan would also tie in with what we saw last year.
Far from the only macro factor that stimulates BTC
A falling Chinese yuan is not the only macroeconomic factor that analysts say will (or will) stimulate Bitcoin today.
In response to the COVID-19 outbreak, governments and their central bank counterparts around the world have been forced to act. It is estimated that they injected $ 20 trillion in incentives (denominated in USD) into the global economy.
Investors like Paul Tudor Jones – a multi-billion dollar hedge fund manager – think this stimulus will trigger major monetary inflation, driving demand for scarce assets like Bitcoin.
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