RMB depreciation cannot drive Bitcoin price up

Rage Commentary : The link between the RMB and Bitcoin prices seems to have weakened. There is speculation that China's macroeconomic concerns are also one of the reasons for the rise in Bitcoin prices, but the country's recent decision to lower the RMB's fixed exchange rate from August was a failure, causing changes in digital currency prices this week. This is all driven by long-term bullish sentiment, which has become of interest to Bitcoin industry observers who want to catch up with larger and more macro market trends, and China has become a special focus of attention for local exchanges' major events.

Translation: Nicole

The link between the Chinese yuan and bitcoin prices appears to be weakening.

While there is speculation that China’s macroeconomic concerns are also contributing to the rise in Bitcoin prices, the country’s recent decision to lower the yuan’s fixed exchange rate from August failed, causing changes in the digital currency’s price this week.

Arguably this is all driven by long-term bullish sentiment, which has become of interest to Bitcoin industry watchers who want to catch up on larger, macro market trends, and China has become a particular focus of attention with outsize activity on local exchanges.

But whether such a relationship is in fact an efficient market and a sound indicator for traders remains to be seen, and this week’s activity provides the latest data point in this ongoing exploration.

According to Bloomberg, on June 27, the People's Bank of China (PBOC) lowered the yuan's fixed exchange rate to ￥6.6375/USD, a decrease of 0.9%. Universal Time Adjusted UTC

At 10:44, the Chinese currency had fallen by 0.3%, or 6.6473.

As a result, the yuan's exchange rate against the dollar fell to its lowest level since December 2010.

However, the price of bitcoin has barely budged since these events, with the price moving mostly between $630 and $660 on June 27 and narrowing to between $640 and $660 on June 28, according to CoinDesk’s USD Bitcoin Price Index (BPI).

At the start of the conference on June 29, the digital currency price was $646.30, 2.5% higher than its value on June 27.

In contrast, Bitcoin prices rose 8.7% on June 24. In addition, when BPI data showed that the RMB hit a five-and-a-half-year low against the US dollar, mainstream news agencies such as CNBC began to follow China's economic activities.

Evidence and speculation

When contacted by CoinDesk, market experts had different explanations for the recent stability of bitcoin prices in the face of the falling yuan’s peg.

Petar Zivkovski, operations director of bitcoin trading platform Whaleclub, even declared that any impact of the depreciation of the RMB on Bitcoin "is generally a myth."

He added that while this had been widely used by mainstream media, his company had no idea why it happened.

Zivkovski added:

“Bitcoin is nothing more than an investment asset, and any news about the devaluation of the RMB, news that the market is increasingly expecting, is nothing more than an excuse used by traders to buy rather than actually driving actual demand from RMB holders.

Another expert who spoke about the role of psychology in the market was Arthur Hayes, co-founder and CEO of bitcoin trading platform BitMEX. Hayes believes that while moves like China’s can increase risk sentiment, they only target international traders, not local buyers.

He added:

“The People’s Bank of China’s currency devaluation will affect traders’ bullish and bearish sentiment preferences.”

“The Chinese won’t buy enough Bitcoin to get around capital controls.”

Temporary fluctuations

In the past, both Zivkovksi and Hayes have mentioned temporary volatility, highlighting how prices can fluctuate before quickly falling back to normal levels.

Hayes expressed some thoughts on the currency’s continued price volatility, highlighting the high levels of price swings seen over the past few months.

As for where bitcoin will go in the future, market experts interviewed by CoinDesk were not particularly optimistic.

After a “rapid” climb over the past few months, Bitcoin is now under “profit-taking pressure.”

Zivkovski said this week's events showed that the status quo in China is not enough to encourage new achievements.

Zivkovksi said:

“The three previous times China devalued its currency, including the one a few days ago, Bitcoin prices temporarily rose before quickly falling as the market returned to previous price levels.”

He continued:

“Signs suggest that news of a devaluation of the yuan is not enough to reverse the trend, let alone start a new one.”