Bitcoin Could Surge 70% As China Devalues Yuan Amid Trade War

Arthur Hayes, the founder of BitMEX, has made a series of predictions regarding the potential devaluation of the Chinese Yuan (CNY) and its impact on the Bitcoin market. Hayes argues that the escalating trade war between China and the United States could lead to a significant devaluation of the CNY, which in turn would drive capital flight from China into Bitcoin, potentially causing a substantial increase in its price. He points out that similar price movements occurred in 2013 and 2015, when the CNY was weakened, and Bitcoin experienced significant price surges.

Hayes believes that the mounting pressure on China, including trade wars, tariffs, and economic stress, could lead to economic weakness. He has been strategically buying Bitcoin, anticipating that the Chinese central bank's 'money printing' methods will boost Bitcoin's price dramatically. Hayes predicts that Bitcoin dominance could hit 70%, as he is holding out on altcoins for the short term. He advises traders not to ignore China when making Bitcoin trades, as the country's economic policies and currency movements have a significant impact on the cryptocurrency market.

Markus Thielen, founder of 10x Research, echoes Hayes' sentiments, stating that full-scale economic pressure on China could force it to respond with quantitative easing and currency devaluation. If China permits capital flight, Bitcoin could surge, much like it did in 2015. The People’s Bank of China (PBOC) has set the daily CNY at 7.2038, the weakest since September. A move above this level could indicate a systematic depreciation of the CNY, which would create cheaper Chinese exports, offsetting the negative effects of American tariffs.

Xu Tianchen, an economist, argues that an extra tariff against Chinese goods would not make much of a difference because the tariff rate is already at 60%, meaning that trade is already diminished. Chinese state institutions have been doing everything possible to stabilize the local economy, preparing for an unpredictable trade war. Capital flight may occur if there are increased risks to China’s recovery efforts regarding the economy, and this is especially relevant to export markets because China engages in trade across the globe.

Hayes interprets recent events as a trader, noting that a weakened CNY would be the logical choice for China because it represents an aggressive response with minimal consequences. The CNY has been trending downwards against the U.S. dollar, reaching five-year lows. Hayes believes that monetary policy is China’s greatest weapon against U.S. trade wars. Historically, Bitcoin has often increased in price when the CNY was weakened.

Ben Zhou, co-founder of Bybit, agrees with Hayes that a weakened CNY would be a good sign for the Bitcoin price, citing historical records that confirm this trend. Zhou concludes that China will most likely devalue their currency to offset the negative effects of American tariffs. In 2015, China devalued its currency by 2%, and Bitcoin had large price movements on the upside. A ratio between CNY and USD could be used to measure the potential impact on Bitcoin. Therefore, a trade war between China and the United States could catapult Bitcoin, including other digital assets, into unexplored territory.