In Effort to Support the Yuan, China’s Central Bank Ceases Bond Purchases; BTC Remains Under $95K

On Friday, China’s central bank took significant steps to stem the slide of the yuan, which has been under pressure recently. In an effort to support the currency, the People’s Bank of China (PBOC) announced that it would halt its government bond purchases for the remainder of the month. This decision follows a period of growing bond demand that has outstripped supply.

Experts believe that the move reflects a concern among Chinese policymakers over declining bond yields, which are inversely related to bond prices. Earlier this week, the yield on China’s benchmark 10-year government bond fell below 1.6%, marking a sharp 100-basis-point drop over the past year, as noted by TradingView data.

Meanwhile, U.S. bond yields have been rising, with the 10-year Treasury yield climbing to 4.7%—the highest since November 2023. This increase has contributed to a widening yield gap between the U.S. and China, strengthening the U.S. dollar and weakening the Chinese yuan, which has now fallen to 7.32 per USD, continuing a three-month downward trend.

Market analysts have pointed out that this weakening of the yuan could spark capital outflows from China. Some of this capital may flow into the cryptocurrency market, potentially providing a boost to Bitcoin (BTC). The depreciation of the yuan, combined with ongoing macroeconomic uncertainty, could be a driving factor in increasing demand for digital assets like Bitcoin.