As the yuan falls, domestic investors flock to Bitcoin, sparking government concerns

According to the Wall Street Journal, as the yuan fell, domestic investors began to turn to Bitcoin because it allows them to store their money abroad. These actions have once again raised concerns about Bitcoin in the government, which had previously occurred in 2013.

Last week, Bitcoin trading volume reached 47 million BTC, the highest peak since 2011.

China dominates Bitcoin purchases

China, the world's second-largest economy, dominates Bitcoin trading. According to Huobi's Global Bitcoin Development Research Report, more than 80% of trading volume comes from China.

Image source: Huobi Global Bitcoin Development Research Report

As the Chinese yuan weakens, the price and volume of Bitcoin have increased significantly. Since September 30, the price of the Chinese yuan against the US dollar has fallen by 1.4%, which has led many investors to seek a more stable way to store value and transfer funds offshore to bypass domestic capital controls.

Chinese bitcoin traders can buy bitcoins on domestic exchanges, transfer them to overseas exchanges, and then sell bitcoins to obtain non-RMB funds.

China determines the global bitcoin market

Goldman Sachs estimates that the capital stock in mainland China was $78 billion in September. If capital outflows through Bitcoin really occur, it will engulf the entire Bitcoin market, because the global market value of Bitcoin is only $11 billion.

China’s central bank banned banks from engaging in bitcoin-related businesses when bitcoin prices soared in 2013. Prices later fell and authorities relaxed their policy.

Fears that the Chinese government will refocus on and regulate the Bitcoin market also caused the price of Bitcoin to fall 5.6%.

In 2013, the People's Bank of China and five other ministries and commissions issued a notice on preventing Bitcoin risks, which clearly classified Bitcoin as a virtual commodity rather than a currency. Other major countries in the world also have different attitudes towards Bitcoin:

China’s influence on Bitcoin price changes

Recent activity also suggests that China has a different influence on the price of Bitcoin.

As the RMB continues to weaken, the price of Bitcoin has also seen a sharp rise in recent months.

China's economy has been stagnant for several years, and the central bank has repeatedly cut interest rates to stimulate the economy. At this time last year, China's economic growth fell below the government's 7% target. This was also the lowest annual economic growth rate since 2009, when the world was in the midst of a financial crisis.