TLDR:

China fixed the yuan beyond the key 7.2 level, likely responding to US tariffs
BitMEX founder Arthur Hayes predicts Chinese capital flight to Bitcoin as a result
Similar yuan depreciations in 2013, 2015, and 2019 coincided with Bitcoin price increases
US-China trade tensions are escalating with new tariff threats
Analysts draw parallels to past scenarios where Bitcoin served as a hedge during yuan weakness

China’s recent move to allow the yuan to depreciate past a key threshold could trigger capital flight into Bitcoin, according to industry experts. The People’s Bank of China (PBOC) set its daily yuan fix at 7.2038 per dollar on Tuesday, the weakest level since September, in what appears to be a response to President Donald Trump’s aggressive trade tariffs.

This currency adjustment comes amid rising tensions between the world’s two largest economies. The US president recently vowed to increase tariffs against China, which responded by stating it “will fight to the end” and promised countermeasures to defend its interests.

BitMEX founder Arthur Hayes was quick to identify potential cryptocurrency implications.

“If not the Fed, then the PBOC will give us the Yahtzee ingredients,”

Hayes posted on X on April 8, suggesting China’s central bank could provide the catalyst needed to resume the crypto market bull run.

Historical Patterns of Capital Flight

Hayes pointed to similar situations in the past where yuan weakness corresponded with Bitcoin strength. “It worked in 2013, 2015, and can work in 2025,” he noted, referring to previous instances of Chinese capital seeking refuge in digital assets during currency devaluations.

The historical precedent is striking. In August 2015, China devalued the yuan by nearly 2% against the US dollar, marking the largest single-day drop in decades. Bitcoin saw increased interest during this period, though direct causation remains debated among analysts.

A similar pattern emerged in August 2019 when the yuan fell below the symbolic 7:1 ratio against the USD. Bitcoin jumped 20% in the first week of that month, leading some analysts to suggest Chinese investors were using the cryptocurrency as a hedge against currency weakness.

Bybit co-founder and CEO Ben Zhou echoed this view, stating on social media that

“China will try to lower RMB to counter the tariff, historically, whenever RMB drops, a lot of Chinese capital flows into BTC, bullish for BTC.”

Regulatory Challenges

Despite the historical correlation, China’s increasingly harsh stance on cryptocurrencies presents obstacles to this narrative. The country has implemented some of the world’s strictest crypto regulations in recent years.

A new regulation announced earlier this year requires Chinese banks to monitor and report suspicious international transactions, including those involving cryptocurrency. These measures could make it difficult for local traders to diversify into Bitcoin and other digital assets even during yuan depreciation.

“Since August 2024, the Supreme People’s Court has increased the legal risks for individuals using cryptocurrencies in connection with money laundering, which could easily extend to cases of capital flight,”

noted Markus Thielen, founder of 10x Research, in a note to clients on Monday.

The stringent stance means local traders may face challenges when attempting to move capital into Bitcoin. Banks are now obligated to investigate and report risky crypto trades, which may result in financial restrictions and potential blacklisting for traders.

The Managed Depreciation Strategy

The PBOC’s move signals a shift to a managed depreciation of the yuan. The 7.2 level has long been considered a “harder line in the sand” for the central bank. While the USD/CNY pair has traded above this level a few times since 2022, it has never established a foothold there.

This strategic currency weakening helps keep China’s exports cheaper and more competitive, potentially offsetting the negative impact of Trump’s tariffs on Chinese goods. However, it also creates conditions that have historically driven wealthy Chinese citizens to seek wealth preservation outside government reach.

Crypto asset manager Grayscale previously noted that currency devaluations damage trust in central banks and government financial management, pushing people toward decentralized alternatives like Bitcoin. This distrust in traditional financial systems often benefits cryptocurrency markets.

Bitcoin’s current metrics show a price of $80,253.26 and a market capitalization of $1,592,882,992,461, with a market dominance of 62.56%. The cryptocurrency’s fixed supply strengthens its appeal as a hedge against fiat depreciation, making it a potential beneficiary of China’s economic strategies.

The post BitMEX’s Arthur Hayes: China’s Currency Play Could Ignite Bitcoin’s Next Moon Shot appeared first on CoinCentral.

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Filed under: News - @ April 8, 2025 7:21 am