Is China’s central bank pushing for bitcoin demand in the country?

The story of the Chinese buying Bitcoin flows in two ways – some reports say the Chinese are turning to cryptocurrency because of the FUD created by the US-China trade war, while others indicate that the Chinese are not buying crypto. An article by the Nikkei Asian Review points out that China’s central bank may still be suppressing demand for Bitcoin.

PBOC’s currency devaluation that drives the demand for bitcoins
According to the article, an expert from an informal bitcoin association in China found that the amount of purchases of Bitcoin and other cryptocurrencies increased by as much as 50%, although there is no solid evidence to support this claim.

It will be an outflow of capital in a rising country. In the first quarter of the year, the deficit of errors and omissions in the balance of payments amounted to $ 88 million, and among the reasons for this are capital outflows. The crypto is seen as the main channel through which money flows.

Among the reasons responsible for such an outflow of capital is the policy adopted by the National Bank of China (PBoC) to combat export losses, which has caused a serious devaluation of the currency in recent weeks. On August 5, the PBoC set a daily reference yuan rate below 7 for the dollar, the first yuan in nearly a decade. This created a FUD among people and people, and they were clearly flocking to the “safe haven” of bitcoin.

Analysis of analysts and the impact on trade wars and the price of bitcoin
Several crypto-influencers and analysts have also pointed out that Bitcoin has become a safe haven in these times of global financial FUD, and mostly caused by the US-China trade wars.

Grayscale Investments, a prominent authorized trust for digital currencies in the U.S., attributes 75% of Bitcoin profits to the 2019 U.S.-China trade war.

Recently, Bitcoin bull Tom Lee also confirmed Bitcoin’s status as a safe haven status stating that it is “positively linked to gold” and that “this year it has proven to be a hedge against global risks” on CNBC’s Fast Money.

DailyFX senior currency strategist Christopher Vecchio also pointed to the fact that the price of Bitcoin has been inversely proportional to the yuan since the U.S.-China trade war began in an interview with Kitco.

A week ago, Mati Greenspan, a senior market analyst at eTor, also suggested that the price of Bitcoin and trade wars are linked. He said –

“Although the correlation is not equal to causality and we still do not have enough data, it is hard to ignore the coincidence that bitcoin rose sharply in May and June while trade tensions between the US and China were at their peak. Today we see again the tension between the two largest economies in the world and Bitcoin is on solid feet. “

However, not all crypto-influencers are convinced that trade wars and the consequences of the devaluation of the yuan are pushing the Chinese to buy bitcoin. On August 5, the day of the serious devaluation of the yuan, crypto influencer Dovey Wan tweeted –

The “Chinese buyout of bitcoin” is a VERY dubious narrative IMO

Bitcoin trades at a negative premium on Chinese central stock exchanges such as Huobi and Okex

The OTC price denominated in RMB is now at a premium of 1%, in its normal range from the moment the bull was “

Peter Schiff, a Bitcoin skeptic and golden maximal, also sharply criticized the Chinese story of buying Bitcoin, saying that the Chinese did not buy Bitcoin as a safe haven, but speculators bought it in the hope that the Chinese would buy it as a safe haven.

There is no conclusive evidence to prove the correctness of either of the two narratives.

But at this time when the world is a global village, the effects of events in one part of the world are unlikely to remain localized and FUD crosses borders. Also, political and economic insecurity in various forms affects other parts of the world – the upcoming Brexit is the cause of FUD for residents of the UK and the EU. Hyperinflation has spawned major troubles in countries including Venezuela, Zimbabwe, Argentina and Iran.

When the global economy is in such a problematic state, it is not surprising that Bitcoin becomes recognized as a safe haven asset, which is not correlated with currencies or policies issued by the state.