Bitcoin [BTC] More Closely Related to the Falling Chinese Yuan than Gold: Report

In 2017, the rise in the price of Bitcoin and cryptocurrency was backed purely by speculation that led to the formation of the bubble. These characteristics are familiar with emerging assets. Furthermore, with the institutional set-ups for investment in Bitcoin, the demand has to be different speculation alone.

Bitcoin’s Correlation with FIAT Currencies

The recent hike in the price of the Bitcoin [BTC], just coming off of a bear market, can be attributed to the global economic tension. The US-China trade war has harmed the Chinese yuan; a ‘negative correlation has been observed between Yuan and Bitcoin [BTC] prices. Bitcoin is rising as the confidence in Yuan is shaking.

Also Read: Bitcoin Vs Gold 2.0: Only Indians and Central Banks Are Buying Gold Argues Silbert

BTC/USD 1-Day Chart on Coinbase (TradingView)

Christopher Vecchio Senior Currency strategist, told the media,

“In an environment where the global financial system looks like it is potentially at risk because of the world’ two largest economies going at odds. People may be looking for an alternative avenues to find ways to circumwent the capital controls put in place.”

Furthermore, the relation between Bitcoin and the emerging market currency has also been stable since September last year. He also noted that the correlation between the Turkish Lira reached 0.78, which is significant.

Also Read: Bitcoin Gains 55% in May as it’s 4th Best Month since 2013

CNY/USD 1-Day Chart on ICE-Forex (TradingView)

The world economy is showing a sort of weakness with significant events in the global with Brexit and the exit of  British Prime Miniter Theresa May, the sinking Italian economy, hyperinflation in the Latin nation and so on. The US China-Trade War poses the biggest threat of all. Dai Xianglong, former governor of the People’s Bank of China, said

“If the China-U.S. trade war continues to grow larger, it may cause the global economy to decline, and may cause a global financial crisis,”

Gold/USD 1-Day Chart (TradingView)

Whenever such tumultuous times arrives, investors and central banks have resorted to gold to hedge against the losses in their currencies. It is evident with the correlation statistics that the trend might be shifting to Bitcoin. The volatility in gold has been low since the beginning of the year compared to the economic tension and Bitcoin price.

Do you think that Bitcoin will replace gold? Please share your views with us. 

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