Bitcoin Experts Bullish as China Takes Action to Keep Yuan Above 7.2 Level

The recent depreciation of China’s yuan (CNY) could potentially drive capital flows into Bitcoin (BTC), according to analysts, with some drawing comparisons to past instances when currency weakness spurred digital asset investments.

On Tuesday, the People’s Bank of China (PBOC) set the official yuan reference rate at 7.2038 per U.S. dollar, marking its weakest level since September. The yuan, unlike fully free-floating currencies like the U.S. dollar or euro, is subject to daily fluctuations within a 2% band from the reference rate set by the PBOC each morning at 9:15 a.m. Beijing time.

The 7.2 level has long been seen as a critical psychological barrier for China’s central bank. While the yuan has briefly exceeded this mark since 2022, it has never remained above it for an extended period. With the PBOC now allowing the yuan to break past this threshold, analysts interpret this as a signal that China is embracing a managed depreciation of the currency, a tactic designed to keep Chinese exports competitive in the face of President Donald Trump’s tariffs.

Capital Flight into Bitcoin?

This deliberate weakening of the yuan could trigger a flow of capital out of China, with some analysts predicting that Bitcoin could benefit from this outflow.

Markus Thielen, the founder of 10x Research, noted that the U.S. is intensifying economic pressure on China, which may prompt the Chinese government to implement more aggressive policies, including quantitative easing and currency devaluation. If China permits capital flight, Bitcoin could see a surge in demand, similar to what happened in 2015 when the yuan was devalued.

In August 2015, China’s central bank devalued the yuan by 1.9%, the largest one-day depreciation in over two decades, creating turmoil in global financial markets. While Bitcoin initially fell in line with U.S. stocks, it soon rebounded and surged by nearly 60% in the following months, making significant gains.

Ben Zhou, CEO of Bybit, echoed Thielen’s views, stating on X that yuan depreciation typically leads to increased capital flows into Bitcoin.

“When the RMB weakens, we tend to see Chinese capital moving into BTC, which has historically been bullish for Bitcoin,” Zhou remarked on X.

Regulatory Obstacles to Crypto Movement

However, analysts also warn that China’s strict regulatory stance on cryptocurrencies could hinder capital outflows into digital assets, despite the weakening yuan.

Earlier this year, China introduced regulations requiring financial institutions to monitor and report any international transactions involving cryptocurrency. These measures make it more difficult for traders to move funds into digital assets, with potential penalties for those engaging in “risky” crypto trades. Additionally, Chinese authorities have intensified enforcement, with the Supreme People’s Court increasing legal risks for individuals involved in cryptocurrency transactions related to money laundering, which could extend to cases involving capital flight.

As a result, local investors may face significant challenges if they try to diversify into Bitcoin or other cryptocurrencies, especially amid growing economic uncertainty and a weakening yuan.

Thielen emphasized that while the yuan’s depreciation could fuel interest in Bitcoin, these regulatory barriers present a major obstacle.

“Even though a depreciating yuan may create conditions favorable for Bitcoin, China’s harsh regulatory environment and the rising legal risks make it difficult for capital to flow freely into crypto,” Thielen concluded.

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