Record Chinese Capital Flight Could Propel Bitcoin Inflows Amid Weakening National Economy
Summary:
Amid a weakening Chinese yuan and record capital flight, China may see substantial inflows into Bitcoin (BTC) over the coming months. With the stagnation of the Chinese economy and the absence of growth within local companies, investors may look for opportunities outside of China. Despite stringent capital control laws, cryptocurrency might be a plausible option. Moreover, the narrative of Chinese investors looking towards Bitcoin to transfer funds abroad, which played out in 2016, hints at a similar pattern. However, experts assert that current circumstances may yield different impacts on Bitcoin.
China could encounter a significant influx of Bitcoin (BTC) in the coming months, considering the devaluation of the Chinese yuan and a historic high capital flight out of the country. Markus Thielen, Chief of Research and Strategy at Matrixport, predicts that due to Bitcoin’s familiar stature among Chinese investors and a declining national economy, there could be considerable investments in Bitcoin soon.
Bloomberg's latest official figures indicate that foreign-capital flow out of China reached an astonishing $49 billion in August, marking the largest capital exodus since December 2015 and potentially leading to the further weakening of the Chinese yuan. China's recent record-breaking outflow of $49 billion adds significant strain to its economy.
Thielen notes the 17-year high of the USD/CNY exchange rate as the American economy soars while China's seems to stagnate. There is a distinct lack of growth in Chinese firms due to disappointingly mild post-pandemic consumption recovery and insufficient government interventions to bolster the economy. Thielen suggests that this stagnation and sustained devaluation of the yuan could prompt investors to look for opportunities beyond China.
Despite strict regulations, cryptocurrency may be a viable option considering limited channels exist for foreign investments, according to Thielen. BitMEX co-founderArthur Hayes also toys with the idea that Chinese funds are already being diverted towards gold and US dollar offshore debts, while boldly expressing his optimism for Bitcoin.
This narrative is reminiscent of the 2016 surge in Bitcoin among Chinese investors seeking to transfer funds abroad. Indications of a correlation between the depreciation of the yuan and the rise in Bitcoin's value were noted, culminating in Bitcoin's peak in late 2017.
Edward Engel, a crypto analyst at Singular Research, however, contends that the circumstances have evolved and a present-day capital flight from China might not influence Bitcoin the same way it did in the past. He cites recent restrictive measures by the Chinese authorities that have essentially hindered capital outflows through old routes.
Despite this, Thielen suggests that there may be alternative means for Chinese investors to access cryptocurrencies, such as mining crypto using domestic electricity or purchasing Tether (USDT) through over the counter (OTC) traders and transferring crypto globally in apparent defiance of regulations.
Bitcoin's value has toggled between $25,000 and $27,000 since mid-august and presently trades at $26,621 according to Cointelegraph Markets Pro. Meanwhile, in recent Asian Express events, PEX staff vacated an event due to a scandal, Mt. Gox encountered difficulties, and Diners Club explored crypto.
Published At
9/22/2023 4:07:00 AM
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