China recently experienced its capital outflow reaching a staggering $49 billion in August. Experts are currently engaged in a debate regarding the potential positive effects of this on Bitcoin and the wider cryptocurrency market.
With the Chinese currency weakening and significant movements of capital it is plausible that Bitcoin will witness investments from China in the coming months. Markus Thielen, a leading figure at Matrixport highlights how investors familiarity with Bitcoin during economic downturns could lead to increased investments in this digital currency.
Recent data from Bloomberg reveals that August saw the substantial capital outflow from China since December 2015 which may place additional pressure on the yuan. Thielen points out that the USD/CNY exchange rate is currently at its level in 17 years. He attributes this to contrasting growth between the U.S. Economy and Chinas momentum slowdown. Following the pandemic Chinas economic recovery did not meet expectations leading local businesses to experience growth pressures. Consequently investors might be motivated to explore opportunities beyond Chinas borders.
Considering Chinas capital controls Thielen suggests that cryptocurrencies could serve as one of the few available alternatives, for investors.
On September 20 Arthur Hayes of BitMEX shared a viewpoint suggesting that Chinese investors could potentially choose to invest in gold or use the funds to repay their offshore debts in the United States. He also expressed optimism about a portion of this capital finding its way into Bitcoin.
In the past back in 2016 Chinese investors turned to Bitcoin as a method to move their capital out of the country. Trading volumes at that time indicated a connection between the value of the yuan and the price of Bitcoin, which saw an increase by the end of 2017. However crypto analyst Edward Engel from Singular Research is doubtful that this scenario will repeat itself due to regulations imposed by China since then.
Previously “junkets” facilitated money transfers abroad for wealthy Chinese gamblers. However China has intensified its crackdown on these entities. Despite these measures Thielen suggests that there may still be avenues for funds to explore cryptocurrencies. For instance they could utilize power sources for cryptocurrency mining or engage in, over the counter trades involving Tether to facilitate international crypto transfers.