Popular digital currency is back at $745 as demand surges, driven by concerned investors after the Chinese yuan dropped to its lowest point since December 2008 overnight.
The influence of Chinese investors’ demand for bitcoin has repeatedly made headlines, especially with the falling Chinese yuan and experts predicting further declines. Against the U.S. dollar, the yuan dropped to a new eight-year-low, with China’s central bank dropping the reference rate for the ninth consecutive trading day.
“The pressure for the yuan to decline could be stronger next year as Trump’s policies could lead to a dollar rally and amid concerns about China-U.S. trade relations. The People’s Bank of China can curb high volatility with stronger fixings and intervention, but it won’t do so unless outflows surge, as such measures could add great pressures to the foreign reserves,” said Harrison Hu, RBS Group PLC’s Chief Greater China Economist, according to Coinspeaker.
There is a small possibility that the People’s Bank of China will take measures to artificially stabilize the yuan exchange rate since such actions might give President-elect Donald Trump more ground to call China a currency manipulator. During his campaign, Trump has continually accused China of deliberately devaluating its currency to gain a competitive edge in the global market with its exports.
China developing its own digital currency
Meanwhile, China’s central bank has started testing its own digital currency, which it plans to replace paper currency in the coming years.
The new digital currency, coined “ChinaCoin,” works on cryptographic techniques, just like bitcoin, according to the People’s Bank of China. The goal, according to the bank, is to induce more transparency within business and commerce, while at the same time, curb money laundering, stop outflow of currency to foreign locations and to stop tax evasion.
PBC isn’t the first bank to show interest in digital currency. Central banks in UK, Russia, Canada and Australia have also showed interests in developing blockchain-based digital currencies, as the technology is supposed to support a more efficient digital money system.
Current bitcoin price and trade volume
The price of bitcoin dropped to $741.28 early Friday morning, with a trade volume of $49.84 million.