IDEAS

What Bitcoin Trading Volumes Can Tell Us About The Strength of The Chinese Currency

..and in turn, the health of the Chinese economy

Jørgen Veisdal
Sep 29, 2019 · 9 min read
What is the correlation between the price of one US dollar in Chinese yuan (red), the price of Bitcoin (orange) and precious stone imports from Hong Kong to mainland China (blue)?

History

Effects of Capital Outflow from China

Bitcoin Trading Volume and USD/CNY Rates

“As the People’s Bank of China tightened capital controls and the yuan continued to weaken, Bitcoin became an increasingly attractive way for Chinese residents to get their money out of the country”

Relationship Between Chinese Currency Devaluation and Bitcoin Trading Volume in CNY

Chart 1. BTC settlements in CNY in the period May ’14 - March ‘16
Chart 2. Price of BTC in USD in the period January ’15 - March ‘16
Chart 3. The price of Bitcoin in USD (yellow, left Y-axis) plotted alongside the price of $1 in CNY (red, right Y-axis)

Bitcoin Trading Volume, Other Asset Classes and USD/CNY Rates

Relationship Between Chinese Currency Devaluation and Precious Stone Imports

Chart 4. Precious stone imports as percentage of total Chinese imports from Hong Kong (Source: RBC Capital Markets)
Chart 5. Chart 3 + Chart 5 overlaid in the period Jan ’15 - Sept ‘16

Enter Donald Trump

Chart 6. Price of $1 in Chinese yuan in the period Jan ’15 - Mar ‘18
Chart 7. Chart 4 and 6 overlaid in the period Jan ’15 - Mar ‘18
Chart 8. Bitcoin settlements in Chinese yuan from Jan ’15 - Mar ‘18

Down to the point

Going forward

Relationship between Trust in Chinese Yuan and Precious Stone Imports

“In November [2018], precious stones — diamonds, sapphires, opals and the like — accounted for 53 per cent of China’s total imports from Hong Kong, up from a low of just 2.9 per cent last February” — Elsa Lignos

Chart 9. Price of $1 in Chinese yuan in the period Jan ’15 - Jan ‘19
Chart 10. Chart 4 and 6 overlaid in the period Jan ’15 —Jan ‘19

Where does that leave us?

Disclaimer

Blue Poles

Ideas, essays and analysis