Home > News > A Weakening Yuan: The advent of the DCEP could be good news for Bitcoin

A Weakening Yuan: The advent of the DCEP could be good news for Bitcoin

Benson Toti

Uncertain economic times and fears of sanctions have seen the Yuan suffer.  Bitcoin could be set to improve as a result and the DCEP could be rushed in response.

The yuan has been struggling against the dollar recently and this is believed to be related to mounting tensions between the two countries over Hong Kong.

China has recently tried to impose new laws in Hong Kong, which the inhabitants have deemed unlawful.  China, believing they are lawful, have continued to press on with trying to get the laws passed.  Naturally, there have been clashes and riots as neither side seems willing to step down.

The United States has firmly sided with the people of Hong Kong and in doing so have put further strain on their relationship with China.  It is believed that the US may impose further sanctions on China in an attempt to help leverage the situation.

A number of Chinese institutions conduct dealings in dollars and it is these transactions that the sanctions would directly affect.  By obstructing these deals, the US would be able to place a certain amount of strain on the Chinese economy.  The market sentiment of this taking place looks to be reflected in the yuan’s price at the moment.

Digitise your worries away

Combined with coronavirus, these potential US sanctions have created a cry for a digital currency in China.  The country hopes that a digital currency run by a central bank would be able to provide a more stable economy.

It would also be one of the final steps towards a cashless society.  Something that COVID-19 pandemic has left many around the world pondering on recently.

Good news for Bitcoin?

Bitcoin has historically done well against a weak Yuan.  During the trade war of last year, Bitcoin experienced noticeable price improvements.  Whether these are directly correlated however remains to be seen.

What can be said for certain, however, is that in times of economic uncertainty people do tend to flock toward Bitcoin.  China undoubtedly now faces a time of economic uncertainty, along with the rest of the world.

The true impact of the coronavirus on global financial economies has not yet been fully realised and China almost certainly will not step down from its stance on Hong Kong.  Therefore, tensions will remain, and perhaps increase between America and China.

For the digital yuan, CBDCs could be beneficial to the fortunes of Bitcoin as well.  Countrywide implementations of CBDCs would familiarise vast swathes of the population with digital currencies and as a result, help to normalise cryptocurrencies such as Bitcoin.

Through the necessary education on the topic that such a transition would require, many more people would become informed and intrigued by Bitcoin and therefore more likely purchase some. This would have a beneficial impact and push the price even higher.

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