Across The Border | Yuan weakness prompts Chinese investors to place risky bets on digital currency bitcoin
Chinese investor demand for asset diversification amid the depreciating yuan has helped drive bitcoin to its highest value in three months, with the mainland Chinese market now accounting for 90 per cent of all trading in the digital currency.
Bitcoin’s price hit US$683 on Thursday, the highest since early July, while trading volume reached a six month daily high of 6.65 million bitcoin, according to data from Bitcoinity.org.
“Limited investment channels for Chinese investors drive them to seek all possible investment tools to preserve their asset value,” said Victor Au, chief operating officer at Delta Asia Securities. “The search for more diversified channels has become more pressing after recent property cooling measures started to calm China’s housing frenzy and after last year’s Chinese stock market crash sapped speculators’ confidence.”
The new bout of yuan weakness and expectations that the currency will drop further have substantially added to the demand for asset diversification, Au added. The Chinese yuan has fallen more than 1.5 per cent against the US dollar in September alone and the currency hit a six-year low at 6.7922 on Thursday.
Limited investment channels for Chinese investors drive them to seek all possible investment tools to preserve their asset value
Xu Mingxing, chief executive officer of Okcoin, one of the largest bitcoin trading platforms in mainland China, echoed these views, saying that Chinese investors have become more active in seeking investment alternatives to relieve the pressure of the weakening yuan – and bitcoin is just one of these alternatives.
“Bitcoin trading, like other tools, just provides an investment channel for asset diversification among Chinese investors, especially these who have a strong risk appetite,” said Xu. But Bitcoin itself doesn’t provide a hedge to the risks of a weakening yuan as it is a highly volatile product, he added.
