Will China Take Bitcoin More Seriously As Yuan Depreciates?

     China now appears to be buying a lot of Bitcoin and currency alternatives (such as gold). The rate of currency depreciation has slowed over the past month. China's foreign exchange committee has ordered financial institutions to increase checks and balances on capital outflows.

     The region’s currency war has led to a massive currency dump when China’s Black Monday suddenly appeared to make the week look bad for financial markets. But it has also fueled interest in alternative currency instruments and increased Chinese purchases of Bitcoin. Chinese exchanges also reported a significant price range between them and US exchanges.

     Bitcoin purchases, gold and precious metals (PM) are not new trends in China, in fact, China has confirmed that its gold reserve interest has increased by 60% since 2009. Even with this sudden wave of PM purchases, banks are able to strictly control the gold market and other safe-trade areas. Tommy Ong of DBS Bank in Hong Kong told Bloomberg News in the United States that banks are controlling capital outflows in order to prevent further damage to the RMB. Ong explained: "The main goal is to reduce volatility, curb capital outflows and limit depreciation pressure on the RMB."

     Bitcoin prices are rising as CNY/BTC trading volumes in China have doubled this week and reached nearly 1 million Bitcoins per day in the past month. Bitcoin trading volumes and prices on Huobi, China's largest Bitcoin exchange, are greater than all smaller currency exchanges in the United States and the United Kingdom combined. CNY/BTC trading currently accounts for the majority of the market, likely due to cheaper electricity, zero fees and the severe depreciation of the RMB over the past few years. Goldman Sachs analysts led by Peter Oppenheimer said the economic shift was caused by stagnant Chinese economic growth and fewer global commodities. Goldman Sachs claimed that since China began to increase investment after the 2008 financial crisis and tried to transform its economy at the same time, its economic growth has been hampered by poor and inefficient investment.

     In the first week of July, Chinese stocks lost $2.36 trillion in market value due to the decline in the past three weeks. The Shanghai Composite Index and Shenzhen Composite Index both fell nearly 30% in the month and caused panic in the global economy. Many markets are worried about the inflation caused by currency devaluation, and they are beginning to feel that economic changes are driving the development of alternative international trade. However, the People's Bank of China requires all banks to pay deposits before selling overseas. Due to these financial edicts, the public will find it difficult to redistribute wealth in traditional stocks, funds and even precious metals markets. This may explain the increase in Bitcoin trading in China, after all, now that the US dollar and other currency alternatives seem to be viable due to economic shocks and the devaluation of the RMB.

     According to Bitcoinity , the three largest bitcoin exchanges that trade in RMB are now approaching 1 million bitcoins per day. At press time, the price of bitcoin rose another 5% across all major Chinese exchanges. There is more debate about whether these Chinese trading numbers are true, both in terms of volume and value. The debate began when Goldman Sachs reported that 80% of bitcoin transactions were conducted in RMB.

     In general, in the field of digital currencies, the volume of transactions on Chinese exchanges has increased significantly. The exact figures vary slightly in different newspapers (such as Coin Market Cap and Bitcoinity), but all show an increase in total volume. The devaluation of the Chinese yuan is real, and its stock market continues to be weak. Entering other alternative markets with less capital controls is not too far away, after all, this has been proven to be feasible in other countries (such as Greece). Bitcoin has now become a financial paradise with gold and silver, and Chinese buyers are enjoying these assets. The continued devaluation of the yuan will make investors look for solutions, such as Bitcoin, which can become a better trading option.