Bitcoin’s price has marked a spectacular increase of around 10 percent over the past couple of days in a move that was nothing if not sudden. Comparing Bitcoin’s situation now to that of 2016, analysts and industry experts think that the instability of China’s yuan relative to the dollar could soon shift the country’s position with regard to crypto.
China’s Bitcoin Fever in 2016-2017
Many are comparing Bitcoin’s parabolic price movement of 2019 to that of 2016 and 2017, when the cryptocurrency reached its all-time high price of around $20,000. Now that Bitcoin is up more than 270 percent since the beginning of 2019, it seems only reasonable to make the comparison.
However, many industry experts and analysts, including Alex Saunders, CEO and Founder of Blockchain Education, tweeted that one of the key differences between then and now was China’s position.
Most crypto participants weren’t around in 2016 when China really had #Bitcoin fever. If their currency continues to weaken, you can bet they will be chasing that $BTC feeling again. Breaking the 7 peg today is significant… pic.twitter.com/u1xQlZG90v
— Alex Saunders (@AlexSaundersAU) August 5, 2019
Notably, back before China issued a blanket ban on all crypto trading and exchange operations, the country was among the leading nations in cryptocurrency. Chinese investors represented a significant share of the overall market, and they had a serious impact on its development.
Two of the world’s largest cryptocurrency mining chip manufacturers, Bitmain and Canaan, are Chinese companies, and they comprised a serious proportion of the network’s hashrate.
What followed, however, was a full-blown clash with cryptocurrency, as the country’s central bank, the People’s Bank of China (PBoC), banned security token offerings as well. China went on to ban all crypto-related commercial activity as well.
It’s also worth noting that the Chinese yuan was relatively stronger against the US dollar back then, as can be seen on the chart below.
Is Bitcoin Becoming a Hedge Amid Uncertain International Economics?
In 2019, however, the situation couldn’t be more different. China’s stance on Bitcoin and cryptocurrency remains legislatively negative. However, there have been some positive developments in this regard. Last year, President Xi Jinping called blockchain technology a part of a “new industrial revolution,” sparking expectations of a potential lift on the blanket ban.
Going further, there are growing tensions between China and the US, especially after US President Donald Trump’s recent announcement of yet another round of tariffs on $300 billion worth of Chinese goods intended for import to the US.
It’s also the case that the Chinese yuan is increasingly unstable against the US dollar, recently breaking below the 7-peg and hitting 11-year lows.
According to popular Bitcoin permabull and former Wall Street hedge fund manager Michael Novogratz, all of the above could be the reason for Bitcoin’s latest rally, and that the latter could be well-justified.
With the yuan over 7.0, an FX war, instability in HKG and the beginnings of capital flight, $Btc rally could have real legs.
— Michael Novogratz (@novogratz) August 5, 2019
The question that everyone is trying to answer now is whether we are on the eve of yet another Chinese comeback, similar to the one that we saw back in 2016.