How Bitcoin Can Reveal the True Value of the Chinese Yuan

As you may or may not know, the Chinese currency, the Yuan, has a fixed exchange rate set against the US dollar. If you’ve wondered what Trump was going on about, when he’s talked about China manipulating currency, this is it. If the Yuan were allowed to float, it’s likely it would be worth more than it is, and products and labor from China would not be so bargain basement.

I’ve been looking into Bitcoin, the cryptocurrency, trying to see trends and correlations that might help me understand prices for currencies and commodities. Interestingly, I found this brief article on how Bitcoin might shed some light on the true value of the Yuan when we compare it’s exchange value to that of the US Dollar. In other words, if the Yuan is set to 6.5 to 1 US Dollar, is 6.5 Yuan always worth $1 when passed through Bitcoin as an intermediary exchange? It’s not.

Profiting from differences like this is called arbitrage. Just in case you thought this would be the secret to making a fortune the author of the article cautions that it’s not that easy to move in and out of Yuan. Still possible, but might require some cleverness. With China’s restrictions on Bitcoin perhaps additionally difficult, but as people in China seek to move their wealth out of China and out of the Yuan, we may increasingly see Bitcoin and other cryptocurrencies used as a medium of exchange.