U.S. tariffs on China could have unintended consequences as the nation curtails dollar acquisitions, with currency fluctuations on both sides driving interest in Bitcoin.
China is making efforts to stabilize its currency in light of historic U.S. tariffs, which has led to an increased appetite for Bitcoin (B). On Wednesday, April 9, the People’s Bank of China urged leading banks to cut down on their U.S. dollar purchases to bolster the weakening yuan.
The domestic market in China is still struggling from the impact of a staggering 104% tariff on all Chinese goods that took effect at noon Eastern Time on April 9. In reaction to this, the yuan dropped to 7.3498 per dollar at the end of the domestic trading session, marking its lowest point since December 2007.
Geopolitical instability has affected cryptocurrency assets overall. On April 9, Bitcoin saw a decline of 4.07%, trading at $76,407. Nonetheless, some analysts argue that this situation could eventually work in Bitcoin’s favor.
Bitcoin may thrive amid a weak dollar and yuan
Experts from a blockchain company in Singapore indicated that a weak yuan might spur a surge in Bitcoin. Arthur Hayes, co-founder of BitMEX, shared a similar view, noting that Chinese investors seeking safe havens might turn to Bitcoin.
This perspective hinges on Bitcoin’s reputation as a safeguard against inflation, which it indeed is for certain investors. For example, during the currency crises in Lebanon and Turkey, many turned to Bitcoin, finding it a relatively stable option compared to their national currencies.
However, others dispute this viewpoint, arguing that Bitcoin tends to act more like a risk asset. Recently, a report from Binance highlighted that Bitcoin’s correlation with the S&P 500 surged to 0.47, while its correlation with gold decreased to –0.22.
This points to the idea that, despite ongoing geopolitical tensions, traders continue to view Bitcoin primarily as a high-growth, risk-oriented asset rather than a protective hedge against inflation. Yet, as economic challenges escalate, this perception might begin to evolve.