Bitcoin may experience significant inflows from China in the coming months due to a weakening Chinese yuan and a surge in capital flight. Markus Thielen, head of research and strategy at Matrixport, predicts that Chinese investors will turn to Bitcoin as a familiar and accessible investment option during a period of economic decline.
Recent data compiled by Bloomberg reveals that China’s capital outflows hit $49 billion in August, marking the largest monthly capital outflow since 2015. This further adds pressure on the yuan, potentially driving Chinese investors to seek alternative investment opportunities outside of the country.
Thielen argues that the ongoing weakness of the yuan and the lack of growth among local companies may lead investors to explore options beyond traditional assets. Due to China’s strict capital controls, Thielen suggests that cryptocurrencies, particularly Bitcoin, may be one of the few viable channels available.
BitMEX co-founder Arthur Hayes also speculates that Chinese capital may be flowing into assets such as gold and paying off offshore US dollar debt, with the hope that some of it will find its way to Bitcoin.
This narrative has played out before in late 2016 when reports suggested that Chinese investors were increasingly using Bitcoin to move capital out of the country. At that time, the trading volume out of China indicated a possible correlation between the value of the yuan and the price of Bitcoin, which eventually reached its peak in late 2017.
However, Singular Research crypto analyst Edward Engel argues that the impact of a Chinese capital flight on Bitcoin may not be as significant today as it was in the past. Engel believes that China has become more adept at stopping outflows, making it unlikely that people are still using outdated methods.
Despite Engel’s view, Thielen suggests that there may still be surviving methods for Chinese capital to utilize cryptocurrencies, such as mining crypto using domestic electricity or using over-the-counter traders to buy Tether via Tron and send crypto internationally.
As of now, Bitcoin has been maintaining a price range of $25,000 to $27,000 since mid-August. However, it is important to note that the cryptocurrency market is highly volatile, and prices can experience quick fluctuations.
In conclusion, the weakening yuan and China’s capital flight could potentially drive Chinese investors to seek alternative investment opportunities, with Bitcoin being a likely choice. While the impact on Bitcoin might not be as significant as in the past, there are still possible avenues for Chinese capital to flow into cryptocurrencies.
