Following a key shift in China’s yuan policy, analysts are forecasting a potential surge in Bitcoin (BTC) demand, as the depreciation of the yuan might trigger capital outflows into cryptocurrencies.
On Tuesday, the People’s Bank of China (PBOC) set the yuan’s official reference rate at 7.2038 per U.S. dollar, marking its lowest point since September. The yuan, unlike freely traded currencies such as the U.S. dollar, is controlled by the PBOC, with a fixed daily reference rate that allows for a 2% fluctuation either way.
The 7.2 level has long been regarded as a significant psychological threshold for the PBOC. Although the yuan has occasionally surpassed this point since 2022, it has not remained above it for an extended period. By explicitly setting the reference rate at this level, the central bank seems to be embracing a more gradual depreciation, a move designed to make Chinese exports more competitive in the global market and help offset the negative effects of U.S. President Donald Trump’s tariffs on Chinese goods.
Bitcoin as a Safe Haven Amid Currency Weakness
The ongoing depreciation of the yuan could prompt significant capital outflows from China, and analysts are pointing to Bitcoin as one of the primary beneficiaries of this shift.
Markus Thielen, founder of 10x Research, noted that the U.S. is stepping up economic pressure on China, which may force the Chinese government to engage in more aggressive monetary policies, such as quantitative easing and further currency devaluation. If China permits capital to move freely out of the country, Bitcoin could see a rise in demand, as investors seek refuge in digital assets. This scenario mirrors the events of 2015, when Bitcoin surged in response to the yuan’s devaluation.
In August 2015, China devalued its currency by 1.9%, causing a sharp shock to global markets. While Bitcoin initially followed the broader market downturn, it soon reversed its losses and experienced a significant rally, climbing by nearly 60% in the months that followed.
Ben Zhou, CEO of Bybit, shared a similar sentiment on X, commenting that yuan depreciation tends to drive capital into Bitcoin.
“Whenever the yuan weakens, Chinese capital typically flows into BTC, and this has historically been bullish for Bitcoin,” Zhou said on X.
China’s Regulatory Environment a Roadblock
Despite the potential for capital to flow into Bitcoin, analysts caution that China’s stringent regulatory environment may limit the extent to which local investors can move their funds into digital assets.
This year, China implemented regulations requiring financial institutions to track and report international transactions involving cryptocurrencies. Banks are obligated to investigate and report any suspicious crypto-related transactions, with potential penalties for those involved in illicit activities.
Moreover, the Chinese Supreme People’s Court has increased legal risks for individuals using cryptocurrencies in connection with money laundering, which could extend to capital flight cases. These regulations create barriers for Chinese investors who may otherwise look to Bitcoin as a safe haven amid the economic uncertainty caused by the yuan’s depreciation.
Thielen explained that although the depreciation of the yuan could create favorable conditions for Bitcoin, the regulatory landscape in China presents a major obstacle.
“While a weakening yuan could boost Bitcoin’s appeal, China’s tight crypto regulations mean that capital movement into Bitcoin may not happen as easily as it did in previous years,” Thielen warned.
