Bitcoin-yuan divergence is reaching new highs and it is further increasing the speculations that the Chinese are trying to find safety in the world’s largest decentralized cryptocurrency as we are reading in the coming altcoin news below.
The bitcoin and yuan have been going to different directions for a while now and the inverse correlation has reached a record last week according to the Bloomberg analysis of their 30-day correlation. The correlation between the two assets could be resulting from a number of reasons including the Chinese trade war in the United States and the central bank’s monetary policy and the slowing economy. According to the CEO of Broctagon Don Guo, bitcoin is now used as a way to hedge against traditional market volatility. He stated:
“The role of these assets has essentially been reversed. Traders have been expecting a fall in the yuan for a while, in light of international tensions and the central bank monetary easing policy. With the trade war raging on, nervous forex traders have started to look at ways to diversify their portfolio and hedge against any market volatility. And, ironically, this has led them to turn to bitcoin, which has long been considered a notoriously “risky” asset, to hedge against a traditionally safer investment.’’
This is not the first time this year that the correlation between bitcoin-yuan is becoming more evident since it has also happened in April and May. This happened when the tensions increased with the deterioration of the US-China trade relations as per Dr. Garrick Hileman who is the director of research at blockchain.com:
“A lot of traditional assets are flashing warning signs so investors are looking elsewhere. Fears of an incoming global recession has led to a flee from the stock market and bond yields aren’t looking too appealing. As digital assets are less dependent on the political climate, they are increasingly being seen as a “safe haven” asset. This goes double for China, where the government has taken positive steps in it’s attitude towards cryptocurrencies, adding weight to its appeal as a hedge. It’s likely this will continue whilst market fears drive other assets on a downward spiral.’’
As we reported in the latest cryptocurrency news, China made headlines with the plans to release a state-backed digital token and as the crackdown is still ongoing, there are some signs that the country will rethink the crypto-related policies.
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Stefan has been writing articles for DCForecasts since 2016 in-house full time. As one of our main cryptocurrency writers, he focuses on covering the latest cryptocurrency news, technical charts, price analyses of coins and press releases. When he is not exploring and covering the latest topics in crypto, you can find Stefan playing basketball, tennis or cycling.
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