Interest in bitcoin is soaring this week, with charts on Baidu (China’s predominant search engine) showing individual searches for the keyword rocketing past 72,000.
Interest Spikes as Yuan Devalued
Twitter user cnLedger posted the Baidu chart earlier today, noting that the previous two – and relatively minor – spikes in interest this year matched the “outing” of Craig S. Wright as Satoshi Nakamoto, and bitcoin’s price breaking 3,000 CNY (450).
By contrast, the previous spikes barely recorded 30,000 searches for “bitcoin.”
Perhaps coincidentally, the sudden interest in bitcoin comes amid further depreciation in the value of China’s currency, the yuan (aka the renminbi, or CNY). The exchange rate fell again today, with CNY value now just over 6.60 CNY to $1 USD – its lowest point since 2011.
Unlike other major currencies, the yuan is not traded officially on international markets and its value is set, rather than being allowed to float freely. Chinese residents are also forbidden from moving more than $50,000 (equivalent) out of the country per year.
The People’s Bank of China (PBOC) in mid-2015 began a series of dramatic drops in the yuan’s official value, after allowing it to gradually appreciate from 2010-13.
Low Yuan, High Bitcoin?
Whether or not CNY devaluations have affected bitcoin prices this past month remains debatable, however.
Eric Mu, of Chinese bitcoin mining and financial services company HaoBTC said:
I personally think associating bitcoin price movements to macroeconomic indicators is mistaken.
Mu added that bitcoin-related pyramid schemes like MMM, rightly or wrongly, may have played a larger role in raising bitcoin’s profile in China.
“There’s strong evidence they bought large amounts of coins on the market,” he added. “That may not be the entire reason, but all it takes is a trigger to set the bull off.”
It should be noted the largest single devaluation of the yuan recently was in August 2015 – a time the BTC-CNY price was at its lowest point in years. BTC did not experience any dramatic gains until around October that year.
Bitcoin interest may be at all time highs, but the exact reasons behind its jump in value over the past month remain speculative.
Devaluing the CNY is good news for China’s massive manufacturing and export industry, but bad for the Chinese travel industry and foreign companies importing products into China.
Imports to China usually consist of luxury goods (cars, fashion) and raw materials. Apple, which relies on the Chinese market as a major purchaser of its products, experienced a stock slump after the August 2015 devaluation.
China has often been accused of manipulating its currency to unnaturally low levels, making its products (and labor) cheaper overseas while acting as a virtual tariff to prevent foreign goods from competing in the Chinese domestic market. Many, however, disagree with this viewpoint.
US Presidential candidate Donald Trump has made trade with China a key focus of his election campaign, threatening Chinese imports to the US with high taxes, incentivizing businesses to return capital held offshore, and even forcing US companies like Apple to manufacture products domestically instead of in China.
Do you think China’s impact on Bitcoin price is overestimated? Let us know in the comments section below!
Images courtesy of marketwatch.com