Crypto Analysts Hopeful as China’s Yuan Surpasses 7.2, Surprising Market Expectations

Analysts are warning that China’s recent decision to allow the yuan (CNY) to depreciate beyond a crucial level may lead to capital outflows, with Bitcoin (BTC) seen as a potential safe haven for investors.

On Tuesday, the People’s Bank of China (PBOC) set the daily reference rate for the yuan at 7.2038 per U.S. dollar, marking its weakest point since September. The yuan, unlike fully free-floating currencies like the U.S. dollar or euro, is managed by the PBOC and can fluctuate within a 2% range on either side of the daily fix, which is announced at 9:15 a.m. Beijing time.

The 7.2 threshold has long been seen as a critical level for the Chinese central bank. While the yuan has occasionally traded above this mark since 2022, it has not consistently remained above it—until now. By setting the reference rate above 7.2, the PBOC appears to be signaling a deliberate policy of yuan depreciation, which could help offset the negative impacts of President Donald Trump’s tariffs by making Chinese exports more competitive on the global market.

Potential for Capital Flight into Cryptocurrencies

As the yuan weakens, analysts suggest that capital flight from China could accelerate, and that cryptocurrencies like Bitcoin may attract some of these outflows.

Markus Thielen, founder of 10x Research, predicted that China’s response to increased U.S. economic pressure, including further yuan devaluation, could trigger a flight to alternative assets like Bitcoin, just as it did in 2015. Thielen noted that if China continues to allow capital outflows, Bitcoin could see significant gains, as it did after the yuan’s devaluation in 2015.

Back in August 2015, China devalued the yuan by 1.9%, the largest single-day drop in over 20 years. The move rattled global markets, with Bitcoin initially falling alongside U.S. stocks. However, Bitcoin quickly rebounded and surged by nearly 60% over the following months.

Ben Zhou, CEO of Bybit, also pointed out that yuan depreciation often leads to an increase in Chinese capital flowing into Bitcoin.

“When the RMB weakens, Chinese investors tend to move capital into BTC, and historically, this has been bullish for Bitcoin,” Zhou stated on X.

China’s Increasingly Tough Crypto Regulations

Despite the historical precedent for Bitcoin price gains linked to yuan depreciation, analysts caution that China’s increasingly stringent stance on cryptocurrency could hinder capital flight into digital assets.

Earlier this year, China imposed new regulations requiring banks to monitor and report international transactions involving cryptocurrency, raising the stakes for anyone trying to move capital into digital assets. Traders involved in “risky” crypto transactions could face severe financial restrictions, including blacklisting.

Moreover, the Chinese Supreme People’s Court has escalated legal risks for individuals engaging in cryptocurrency-related activities tied to money laundering, and these regulations could be extended to cases of capital flight. The tightening regulatory environment creates a significant challenge for local traders seeking to diversify into Bitcoin, even in the face of a depreciating yuan and broader economic pressures.

Thielen noted that while the yuan’s depreciation could create a favorable environment for Bitcoin, these legal and regulatory barriers could severely limit the ability of Chinese investors to move capital into cryptocurrencies.

“The combination of rising legal risks and the PBOC’s stringent crypto policies means that despite the economic uncertainty, Chinese capital may find it difficult to flow into Bitcoin,” Thielen said.