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Global markets tank, Bitcoin’s uncertainty lets Gold regain its stature as ‘Safe Haven’

The global markets slumped on January 12, 2017 after a news conference by President-elect Donald Trump. Assets declined across the globe with European, Asian shares and S&P 500 futures all falling, while the dollar slumped against most currencies. The conference disappointed the institutional investors with reveals to very little details as to economic and trade plans. This element of uncertainty resulted in a major slump in US dollar trading after recovering from a three week low. Surprisingly even after so much market commotion, the Bitcoin price remained unaffected despite so much market activity. Let’s look into why Gold reigned while Bitcoin was left behind during the latest market collapse:

Bitcoin stagnant as uncertainty looms:


The year had a lot of surprises that came as backlash for Bitcoin’s Bull Run which neared the all-time high start of this year. Firstly when the prices approached all time high, panic associated to Chinese policies led to the first stage of the collapse. After briefly trading at $900 range for quite some time the next collapse occurred a couple of days later. This was majorly due to the news that Peoples Bank of China has acted on Bitcoin regulation in 2017. They have contacted exchanges to monitor the process in order to avoid currency getting out of the country.

Following the second crash, Bitcoin has formed some kind of support around $750 and has been trading in the area ever since. It remained unaffected during the Yuan’s fall and the global market’s pandemonium since the investors are looking at it cautiously now. After trading sufficient volume and building a strong support, it might finally take off and adhere to the conventionally observed fundamentals.

Gold returns as the only ‘Safe Haven’:


Gold spiked up to over $1,200 after Wednesday’s shift in market dynamics. The price jump for a mere market scare can be attributed to Bitcoins unavailability during this time. The fact that Bitcoin rallied upto the high but wasn’t able to breach it significantly has left an element of doubt in the minds of institutional investors. Hence the general inflow of funds has been redirected to Gold, retaining its status as  reliable asset. Whether Bitcoin would be able to displace Gold again as a security asset or Gold will continue to dominate this sector, only time will tell.


Defying fundamentals: Yuan drops but Bitcoin remains stable, Ethereum to benefit?

Start of the year and the behavior of Bitcoin has been surprising people around the Globe. A sudden halt to the trend, as the price reached the peak and now most unexpectedly the price is unaffected when Yuan is dropping. ‘Bitcoin Trading-101’ would any day tell you to keep an eye on China and Yuan for hints about price movements. This held well until the start of New Year but suddenly has become a futile pro tip. Institutional Investors and Intraday traders are all baffled by this anamoly. Let’s dive deep into understanding how exactly Bitcoin dynamics have changed w.r.t China:

China’s rumored desperate attempt and failure:


While the Bitcoin price was soaring, US dollar was at a three week low strengthening Yuan. China has plans to devalue Yuan further to 7.15% from 6.8125% this year to maintain good returns on exports. But with Yuan strengthening organically, rumors were floating in the market that China might order their state-owned companies to sell their foreign reserves. However while these might be just rumors effecting the market, Yuan devalued further and this time Bitcoin prices have remained stable.

Strong Capital controls taking the steering?


The Chinese authorities have closely monitored Bitcoin in 2016 to control and curb corruption that is hampering their economy. After gathering sufficient information, they have concluded that investors are using Bitcoin to send the money out of the country. China as such has strong capital controls and conversion of local currency into foreign currency is well regulated. However Bitcoin having a peer to peer nature and doesn’t get accounted in these regulations. Hence Chinese authorities have employed strict capital controls over Bitcoin. These measures require identification and completion of detailed forms to convert yuan into Bitcoin. With Yuan’s fall not boosting Bitcoin price, one might suspect that these controls are in place and functional.

Who will benefit from this?

If China slowly fades out from Bitcoin scenario as major driver of price and volumes, next in line would be India. With a large population that recently underwent demonetization and has been adopting Bitcoin and digital payments, India can be the next big player in Bitcoin. The budding digital currencies and blockchain startup scenario in India is surely promising in this prospect.


While Bitcoin price has remained stable in between $900-$910, Ethereum is experiencing an unusual price surge with Yuan devaluation. If it’s the case where the Chinese are now moving funds to Ethereum then it’s only a matter of time before the Chinese government realizes it. This would put all cryptocurrencies in a position to endure complete regulation in China.

China looks to halt Yuan’s fall, tumbles Bitcoin instead

Ironically, for a country that has banned Bitcoin and other cryptocurrencies, China remains to be the highest contributor to Bitcoin in terms of volume. With a total contribution of whooping 96% in 2016, China is a major influencer when it comes to Bitcoin prices. Be it the surprise bull run mid – 2016 or the short term fall in prices or the big push towards the end of the year, China has always had a major hand in it. Coming strongly into the New Year, the Bitcoin Bull Run came to a halt owing to Chinese policies. 5th of January saw Bitcoin dropping from near all-time high to under $950 in a short span of time. Let’s dive deep into how this happened and what might be the fate of Bitcoin from here:

Capital controls kicking in?


The Chinese authorities have closely monitored Bitcoin in 2016 to validate the boost patterns. After thorough analysis, they have concluded that Bitcoin is used to launder money out of the country. China as such has strong capital controls and conversion of local currency into foreign currency is well accounted. Owing to the peer to peer nature of Bitcoin, it has become one of the viable routes to launder money out of the country. Hence Chinese authorities have employed strict capital controls over Bitcoin. These measures require identification and completion of detailed forms to convert yuan into foreign currency. These measures may now be starting to work as the currency becomes scarce offshore.

Halting the Yuan’s fall:


Chinese Yuan increased by 1% following a weak dollar as interest rates rose by 96% in Honk Kong on Thursday. While China has halted the Yuan devaluation temporarily after being included in the SDR basket, they still have some devaluation left to do. Market analysts are betting on a decline of yuan this year to 7.15 from the current 6.8125 but this would trigger a hostile situation with USA. Hence to hold off on the same order China might order their state-owned companies to sell their foreign reserves.

Future Dynamics with US and effect on Bitcoin:


Trump has labelled China as a currency manipulator and aims to negotiate a “fair and free” trade arrangement with China. To escape the falling value of their currency, Chinese citizens started investing in Bitcoin, changing the path of the capital. To stop further devaluation, China is looking to sell foreign reserves. But as this can’t be executed completely owing to US policy intervention, further devaluation of Yuan is likely and definitely set on the cards. Hence Bitcoin will continue the climb once the Yuan dynamics strike a balance.

The longest running Bitcoin Exchange is now open to USA Bitcoin Traders

When two-man team from China launched a Bitcoin exchange in Shangai, they certainly didn’t have US markets on their mind. What launched as a Yuan denominated exchange, in an unregulated environment, is now all set to trade with BTC USD. We are talking about BTC China, currently the longest running Bitcoin exchange. With heavy Chinese involvement, it has been the highest in terms of volume and the oldest in terms of running exchanges. Let’s look into its journey and how BTCC got to US Markets:

The History and the growth:


BTC China was one of three major exchanges started in the summer of 2011. Its contemporaries included Slovenian Bitstamp and the Russian BTC-E. Around that time, MtGox in Japan had the highest volumes in bitcoin market for USD trades. The exchange grew quickly in 2012, despite the close monitoring of Chinese officials. Chinese government and Central bank were starting to enforce threatening steps for the growth of Bitcoin. Despite the negativity, the platform being China’s only exchange for trading Yuan for bitcoins garnered positive press coverage on national television. After the fall of MtGox, the exchange has seen steady increase in volumes which was later pushed up by imposition of capital controls in 2015.

Operating structure:

BTC China has been in business since 2011 building an effective customer relationship. While the company offers services to almost every country in the world, 16 countries are excluded.  These include the typical outsiders like Iran, Cuba, and North Korea. Accompanying them are residents in the US states of New Hampshire, North Carolina, and New York. Anyone can sign up with a photo of their passport, a selfie of themselves holding the passport. They would also need a third form of identification that can be a driver’s licenses or utility bill.

Benefits over traditional exchanges:

The exchange’s fee structure might really attractive for US Dollar traders. Buyers pay only 0.2 percent of a trade, with a minimum of one penny. This is on par with Bitfinex and better than Bitstamp’s 0.25 percent. Meanwhile, sellers can earn money on each trade, receiving a rebate of 0.05 percent for adding liquidity to the board. This beats both Bitfinex and Bitstamp which still charge money to sellers.


The new real-time exchange, currently in beta, offers Market, Limit, Stop, and One Cancels the Other (OCO) orders for spot trading. The Pro trading platform also provides 25x margin trading. The company now also offers a few other bitcoin services, including a bitcoin wallet, physical bitcoins, and a bitcoin mining pools. This would certainly make it  very lucrative option for all the US based traders.


The Chinese look to impose capital controls over Bitcoin, a hiccup to the Bull Run?

When it comes to countries and cryptocurrencies, China and Bitcoin share a relationship similar to estranged lovers. China has a credit fueled economy; Bitcoin had a period of stagnated growth. Chinese used Bitcoins to escape the debt trap and this in turn boosted the growth of the cryptocurrency. The price of Bitcoin almost tripled (from $220 to $730) in a year thanks to the Yuan devaluation. While this is convenient to the proponents supporting the currency, the Chinese government sees this as a threat to the economy.

The Hostility:


China has dominated Bitcoin mining and trading domains for some time now. The widespread use of the digital currency has led the Government to initiate regulations to monitor Bitcoin. In 2013, the government classified Bitcoin as a commodity threatening its status as currency. This placed Bitcoin outside the purview of the foreign exchange regulator. People’s Bank of China and financial regulators made it a point to specify that bitcoin functioned as digital commodity only. Owing to the success of the cryptocurrency, the government itself was looking into possibility of its own national digital currency. In 2013, finally China moved to ban Bitcoin barring all financial institutions from handling Bitcoin transactions.

Capital Control:


Capital control represents any measure taken by a government, central bank or other regulatory body to limit the flow of foreign capital in and out of the domestic economy. These controls include taxes, tariffs, outright legislation and volume restrictions, as well as market-based forces. Capital controls can affect many asset classes such as equities, bonds and foreign exchange trades. As mentioned earlier, China has a credit fueled growth, which implies that it is important that they ensure the value of money is intact. This can only be assured by implementing Capital Control over certain assets.

Government to make the move soon:

According to Bloomberg, Chinese regulators are looking into measures for limiting Bitcoin transactions taking the funds out of the country. The policies include restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation. Also would be in place quotas for the amount of bitcoins that can be sent abroad.



The measures were triggered when investors bought bitcoin on local exchanges and sold them offshore evading taxes. Whenever the Yuan depreciated, there was heavy inflow of funds into Bitcoin as means of hedging. With U.S. interest rate hike around the corner, policy makers are trying to restrict the outflow of funds with Yuan weakening. When the measures will be implemented, growth of Bitcoin will surely face little discomfort.



Bitcoin Finds Strength for Bullish Rally as Chinese Yuan Becomes Weaker

China is fueling an impressive uptrend in the price of Bitcoin as Chinese investors find more reasons to store their wealth in alternative currencies. The Chinese Yuan has been falling lower in the last couple of weeks in response to the possibility that the U.S. Federal Reserve might raise interest rates by the end of this year.

However, Chinese folks are flocking to alternative currencies such as Bitcoin to hedge against currency devaluation and volatility in the Chinese economic landscape. This piece seeks to explore the relationship between Chinese economic woes, currency devaluation and its effect on the gains in the price of Bitcoin.

CoinDesk Bitcoin Price Index for China


Bitcoin soars to four-month high in response to weak Yuan

The Chinese Yuan is becoming weaker in the wake of tougher capital controls designed to limit the amount of money that Chinese people are permitted to move abroad. The weakness in the Yuan has started fuelling an increased demand for Bitcoin and the upside potential for the alternative currency is looking strong.

On October 21, Bitcoin soared by 4% to near a three-month high of $655.50 to mark the highest trading price since July 29. Trading data available in the markets also show that trading volume soared to 5.5 million Bitcoin to mark the highest point in trading volume in the last 7 months.

You’ll remember that China devalued its currency in August 2015 as a means to halt the outflow of money out of the country and in order to help its local manufacturing industry. The move to devalue the currency didn’t sit well with China’s money families and they protected their wealth by diversifying into Bitcoin and other alternative investments. Of course, the price of Bitcoin has gained about 80% from August 2015 to date in response to that devaluation among other things.

The value of Bitcoin will continue to increase going forward as the realities of a weak Yuan sinks deeper. Zhu Jiawei, COO of Beijing-based Huobi, one of the largest Chinese Bitcoin exchanges observes that “as the Yuan enters a path of depreciation, investors will consider investing in assets that can preserve value and hedge risks.” This morning, Bitcoin is already up 0.78% to $653.47 to suggest that it has found support around $640. Bitcoin is up 0.47% on the Chinese market as it trades against 4,505.87 Yuan.

Can Bitcoin cross the $1000 milestone again?

Arthur Hayes, founder of Hong Kong-based Bitcoin exchange BitMEX observes that that value of Bitcoin will continue to increase if Beijing doesn’t deviate from its plan for constant devaluation of the Yuan. It should be noted that Bitcoin currently trades at a 2% premium against to the Chinese Yuan at 4,488.6 in contrast to the price of Bitcoin against the USD.

The Yuan is currently in a free fall against the dollar dropping 0.1% to 6.77723. Hayes observed that the Yuan could fall as much as 7% against the USD by January and that such a massive decline could cause Bitcoin to rise to cross the $1000 milestone again. In the words of Hayes, “The continued devaluation of the Chinese yuan is what’s driving traders at the margin to buy Bitcoin.”

Bitcoin Price Analysis: Yuan Devaluation on the cards, Bitcoin to go up further?

First week of October has seen a positive start for the cryptocurrency, with constant trading over $600 level. The bullish push came at the start of the second week, where market broke $620 and continued to trade higher. Market finally managed to surmount the long term resistance of 100 SMA at 618-620 level cruising to higher prices. While the setup looks bullish, let’s look into the price analysis for the coming week:

Fundamental Key Points:

The adoption of the cryptocurrency and its underlying technology has always been fundamentally positive for the Bitcoin ecosystem. Here are few highlights of the past week fundamentals that might continue to have effect on the prices:

  • China’s Renminibi added to IMF’s SDR as fifth reserve currency
  • FBI investigating into $1.3 Million Bitcoin theft of Bitfinex
  • Russian central bank trys first Distributed Ledger Transactions
  • UN testing Bitcoin and Blockchain for Remittances
  • Dubai to move all Government Documents on Blockchain by 2020

Adding to the above, from a macro perspective, addition of Renminibi to SDR might now see further devaluation of Yuan. As the Chinese have been holding off further devaluation till the review period of IMF, there is a good chance of further downward move. In any case, it would also depend on the timing of the news release and the trading prices at that point.

Technical Analysis:

Long Term Trades:


The Long Term chart has been in an uptrend from the start of this year, with no sign of any set up change currently. The market managed to breach the 100 SMA at $618 and close above it for three consecutive days. Now this 100 SMA can act as long term support and long term positions can be taken with adequate risks. The previous swing high at $770.89 can be a target.

On the daily chart, the Bollinger bands are still not trendy. The change from sideways to trending might be a slow one driven by good fundamental factor. Hence it is important to keep an eye on reserve currencies during this period. Long term trades from the bearish side look risky unless there is fundamental bearish news driving the markets.

Short Term Trades:


On a daily chart, the Bollinger bands are beginning to open out and indicating slow change into purely bullish trend. The market has been trending in the channel as indicated by the trend lines. 100 SMA has now joined the zone of heavy support around $600, with the middle bolligner, 9, 13 and 34 SMAs. Any short term bearish trades would be risky and futile in this period.

To get apt entry positions, let’s look into lower time frame:


On shorter time frame (4 Hrs), the setup is trending in the channel of the trend lines shown. 34 SMA has been the line of constant support and has provided good entry positions for short term trades. When the 100 SMA slowly turned from being the line of resistance to line of support was an indication to get in for the break out trade. During this change, it also crossed 34 SMA signaling even strong change which was the best indication.

While taking long term positions, keeping an eye on Yuan would be very helpful.

IMF Launches New SDR Basket Including Chinese Renminbi, Bitcoin to strengthen?

The International Monetary Fund announced the launch of the new Special Drawing Right (SDR) valuation basket on October 1st. This basket now includes the Chinese renminbi as decided upon sometime back in Nov 30,2015 giving Yuan reserve currency status. This means that Yuan is to be a freely usable currency and will be included in the SDR basket as a fifth currency. The basket already includes the U.S. dollar, the euro, Japanese yen, and the British pound.

What this would mean to rest of the world:

The Renminbi’s inclusion reflects the progress made by IMF in pursuing China to reform its monetary, foreign and financial systems. This acknowledges the advances made in liberalizing and improving the infrastructure of its financial markets. With appropriate safeguards, these efforts will bring about a more robust international monetary and financial system. This will in turn support the growth and stability of China and the global economy.

The value of the SDR will be the sum of the values of the following amounts of each currency:

U.S. dollar




Chinese yuan


Japanese yen


Pound sterling


China to devalue Yuan?

The Yuan has already depreciated over 7 percent this year. It has to devalue Yuan furthermore so as to balance their economy. China has a credit fueled growth. Heavy industries and most of the leading sectors are escaping the inflation by exporting their products abroad. China cannot continue to print money and defend the Yuan from massive depreciation at the same time. But for China to fit in with other currencies in the basket, it has to depreciate Yuan.

China took the initiative to depreciate Yuan this year but couldn’t do it to the requisite levels as it was in review period of IMF for SDR. So it just depreciated to levels enough for the economy to hold for the time being. Now that Yuan is in the SDR basket, China need not save face on the depreciation front. It is estimated that the Yuan might be depreciated by another 23 percent to bring stability to the economy.

What this would mean to Bitcoin:

Yuan(CNY) trades make 70% of the Bitcoin volume during depreciation
Yuan(CNY) trades make 70% of the Bitcoin volume during depreciation

China is the world’s largest economy and is one of the leaders in the exports sector. Even though the Chinese government banned Bitcoin, owing to the corruption issues, Bitcoin investments from china are significant. When the Yuan depreciated, the funds inflow from Chinese investors drove Bitcoin prices high.

This time if we actually see a depreciation of around 23 percent, we can surely expect the cryptocurrency prices to soar high. Will this be the boost Bitcoin has been waiting for to reach $1000 again? This only time can tell.