Share this article
China's Currency Woes to Weigh on Bitcoin: Crypto Observer
Measures taken by the People's Bank of China to cushion yuan against the stock market slide could weigh over bitcoin's price.
Updated Mar 8, 2024, 8:17 p.m. Published Jan 22, 2024, 3:18 p.m.
China is facing renewed currency depreciation as the lingering threat of deflationary economic nosedive, and property market malaise has foreign investors pulling capital out of the country.
The latest measures taken by Beijing to address the issue present a downside risk to bitcoin [BTC] through the foreign exchange channel, according to one observer.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
The tightly controlled Chinese yuan (CNY) has declined 1.39% against the U.S. dollar, with its offshore Hong Kong version, CNH, registering a 1.25% drop. China's benchmark equity index, the Shanghai Composite, has dropped over 7% to its lowest since March 2020, according to data from the charting platform TradingView.
The People's Bank of China (PBOC) loosely pegs CNY's value to a basket of 24 currencies through a managed-float system, allowing the home currency to fluctuate 2% on either side of the daily fix or the reference point.
On Monday, China's state-owned banks sold U.S. dollars onshore while tightening liquidity in the offshore foreign exchange market to support the yuan, according to Reuters. Hong Kong’s offshore yuan one-week CNH Hong Kong Interbank Offered Rate – a gauge of offshore yuan liquidity conditions -rose to 4.95045%, the highest since Sept. 26.
Such measures could lead to broad-based USD strength, tighter financial conditions worldwide, and investors scaling back exposure to risky assets like bitcoin and technology stocks.
That's because when the PBOC sells U.S. dollars onshore to support the yuan, it purchases the USD against other currencies to keep the greenback's proportion in its foreign exchange reserves stable. Other things being equal, the intervention has the potential to lift the dollar index (DXY), which tracks the greenback's value against majors.
Bitcoin is known to be inversely correlated to the USD. The cryptocurrency Q4 2023 surge of 50%, widely attributed to the spot ETF optimism, came as the dollar index fell by 4.5%.
"Major state banks were seen selling dollars today to prop up the Yuan and curtailed lending in order to tighten Yuan liquidity and make it more expensive to short the currency. This typically feeds back into broader dollar strength as dollars are bought back against other currencies to maintain FX reserve ratios," David Brickell, head of international distribution at Toronto-based crypto platform FRNT Financial, told CoinDesk in an interview.
"China is incentivized to keep a lid on BTC to maintain a relative veil of currency stability and discourage capital flight. Past episodes when the Yuan has come under pressure have coincided with BTC underperformance," Brickell added.
The dollar index has already gained 1.8% this month. Bitcoin, meanwhile, has dropped 4% to $40,500, having tapped highs near $49,000 early this month.
Read more: Can Crypto Dethrone U.S. Dollar Dominance? Here Is Morgan Stanley's Take
More For You
What to know:
- As of October 2025, GoPlus has generated $4.7M in total revenue across its product lines. The GoPlus App is the primary revenue driver, contributing $2.5M (approx. 53%), followed by the SafeToken Protocol at $1.7M.
- GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month.
- Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B.
More For You
Bitcoin’s Deep Correction Sets Stage for December Rebound, Says K33 Research
K33 Research says market fear is outweighing fundamentals as bitcoin nears key levels. December could offer an entry point for bold investors.
What to know:
- K33 Research says bitcoin’s steep correction shows signs of bottoming, with December potentially marking a turning point.
- The firm has argued that the market is overreacting to long-term risks while ignoring near-term signals of strength, like low leverage and solid support levels.
- With likely policy shifts ahead and cautious positioning in futures, K33 sees more upside potential than risk of another major collapse.
Top Stories
