“USA – China Tension Can Start Flow to These Cryptocurrencies”: Analyst Draws Attention to Strong Correlation.
The depreciation of the Chinese Yuan can increase the cryptocurrency-based capital flight. NuggetsNewsAU CEO Alex Saunders believes that tensions between the US and China will boost the cryptocurrency-based capital flight.
During previous periods of Chinese capital controls $BTC & $CNY have been tightly correlated. With US-China tensions heating up, watch for China to weaken the Yuan peg (USD/CNY to rise). This may result in capital flight via $USD stable coins or #Bitcoin????? #DeFi #Thickshake pic.twitter.com/60JdgPsS9Q
— Alex Saunders ???? (@AlexSaundersAU) May 25, 2020
How Bitcoin reacts to US-Chinese tensions
Just five months before the expected 2020 elections, US President Donald Trump is expected to increase his hostility towards China and make him one of the key elements of the re-election campaign.
Aside from trading with Beijing on the pandemic response, Trump has escalated the long-term trade war between the U.S. and China, threatening to impose new tariffs.Historically, there was a strong reverse correlation between Bitcoin price and Yuan. When the Yuan lost huge value in 2016, BTC rallied more than 140 percent.
After Trump hit China with a 25 percent tariff in early May 2019, Bitcoin’s price witnessed a 40 percent rally in just over a week.
Crypto-based capital flight
Despite China’s banning crypto exchanges in 2017, citizens of the country still rely on Bitcoin to circumvent their brutal capital controls .According to Chinese law, it is forbidden to transfer more than $ 50,000 in a year to prevent wealthy people from moving money from the country.
In January 2020, research company Peckshield released a report showing that the capital, which came out of China as crypto money, reached $ 11.4 billion in 2019. Tether, the world’s leading stablecoin, is also a popular choice among Chinese citizens to send money abroad.