Category Archives: CNY

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Trade War CNY Devaluation Could Be Real Cause of Bitcoin Rally

CEO of ADVFN, Clem Chambers, thinks that devaluation of the Chinese yuan (CNY) due to a growing trade war between the United States and China is the real reason for the July 2018 Bitcoin rally.

The Bitcoin bear market has abruptly reversed into a rally during the latter half of July 2018, with Bitcoin’s price increasing from USD 6,100 to as high as USD 8,500. Many experts and speculators thought this rally was in anticipation of the approval of the first Bitcoin exchange traded fund (ETF) by the United States Securities and Exchange Commission (SEC). However, the SEC rejected the Winklevoss Bitcoin Trust ETF and thoroughly explained how they will not be approving any Bitcoin ETF anytime soon, yet the Bitcoin market barely reacted. As of this writing on 29 July 2018, after the ETF rejection news has had days to sink in, the price of Bitcoin is hovering above USD 8,200.

Chambers says Bitcoin is the new gold but far better. Like gold, Bitcoin can be used as a safe haven investment when fiat currencies are losing value. Unlike gold, Bitcoin can be purchased instantly, held on a computer, sent anywhere in the world instantly, and then converted back to fiat instantly. This whole process can be practically invisible with Bitcoin, whereas with physical gold the process is cumbersome and risky.

The Bitcoin rally occurred two days before a devaluation of the CNY, and Chambers believes this was insider trading. Even though CNY to Bitcoin trading is banned, it is still easy to do due to the decentralized and worldwide nature of Bitcoin.

The exchange rate of the CNY to USD has declined from 0.156 to 0.147 (7%) since June. This is due to the growing trade war between the United States and China which has seen hundreds of billions of dollars of tariffs issued. Devaluing the CNY is a mechanism by which the People’s Bank of China can gain an upper hand in the trade war, since it increases the trading surplus with the United States, increasing the impact of Chinese tariffs against the United States. Simultaneously, CNY devaluation is accomplished with massive amounts of money printing, which swells China’s treasury.

Chambers told Forbes that if the trade war goes into “meltdown” then Bitcoin’s price will “moon”. Based on this logic, Bitcoin investors should keep an eye on news about the trade war and the CNY/USD exchange rate, since it might have a bigger impact on Bitcoin’s price than anything else at this point.

 

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Bitcoin Trading with Yuan Declines to Below 1% of Global Volume

The People’s Bank of China (PBoC) has announced that Bitcoin trading with the Chinese Yuan (CNY) has fallen to less than 1% of Bitcoin’s total global fiat volume. This is a drastic change from when CNY to Bitcoin trading comprised over 90% of global fiat trading volume at peak levels. This data suggests that the cryptocurrency trading ban has been effective.

In September 2017, China made it illegal to trade CNY for cryptocurrency and simultaneously prohibited initial coin offerings (ICOs). This caused a drastic change since prior to the ban, China had been the global hub for cryptocurrency trading, with the highest volume of cryptocurrency exchanges in the world and by far the most Bitcoin mining.

The Chinese government allowed 88 cryptocurrency exchanges and 85 ICO trading platforms zero-risk exit plans for leaving China. Huobi, Binance, and OKCoin, among the biggest cryptocurrency exchanges in the world, ceased CNY trading which temporarily stifled their operations. Huobi and Binance have actually thrived since the ban, opening cryptocurrency exchanges in multiple countries; they now rank in the top 3 out of all global cryptocurrency exchanges. Huobi moved its headquarters to Singapore and has just opened cryptocurrency exchanges in Australia and the United States with plans to open another exchange in London by the end of 2018. Binance has set up offices and a bank account in Malta, and has already used that bank account to open a fiat to crypto exchange in Uganda, with plans to launch more exchanges in different countries.

OKEx, which is headquartered in Hong Kong and was started by OKCoin’s CEO Star Xu, is also among the top 3 cryptocurrency exchanges. In general, Hong Kong has become the Chinese hub for cryptocurrency activity since it has an autonomous government that is far more favorable towards cryptocurrency than the rest of China. The biggest Bitcoin mining manufacturer in the world, Bitmain, is headquartered in Hong Kong and has a valuation of USD 12 billion. Bitcoin mining activity was largely unaffected by the ban, and China continues to be the global leader in the crypto mining industry.

Ultimately, the Chinese cryptocurrency trading ban appears to have had beneficial effects, since it has led to an overall decentralization of cryptocurrency trading activity. Cryptocurrency and Bitcoin trading was becoming extremely concentrated in China, but the ban forced this activity to scatter across the globe.

 

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