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A depreciating Chinese RMB fuels a rise in Bitcoin price particularly as it now has improved its grip globally.
The price of Bitcoin seems to be climbing again. According to CoinMarketCap, the price of the top digital currency jumped from a rate of $618 earlier on Tuesday October 11 to $633 in three hours at a +2.5% difference.
The rise may have to do with the China's yuan fall to its lowest level in six years early Monday October 10 before erasing the losses on the first day of trading after a week-long holiday. Some China watchers have wondered if any signs of yuan weakness following the holiday would signal that Beijing was putting the currency back on a slow depreciation path after holding it steady through September.
Coinmarketcap’s display is consistent with illustrations on Trading View which shows trading on the BTCCNY Bitcoin chart move from a low 4150/BTC to 4260/BTC between 5.00 a.m. and 6 a.m. the same morning gaining a 2.7% increase.
This height has only been reached twice - recently between June and July 2016 just before the Bitfinex attack and between November 2013 and January 2014.
Following the coming into effect on October 1, 2016 the inclusion of the Chinese RMB in the SDR basket having met the existing criteria and approved by the Executive Board of IMF in November 2015, it is worth noting that based on the IMF’s adopted formula assigned to determine currency weights in the Special Drawing Right (SDR), the Chinese renminbi now weighs third after the US dollar and euro of the top five currencies which also include the Japanese Yen and British Pound Sterling.
The U.S. dollar 41.73%, euro 30.93%, Chinese renminbi 10.92%, Japanese yen 8.33% and pound sterling 8.09%.
Effective October 1, 2016, weights were calculated in equal shares to the currency issuer’s exports and a composite financial indicator which includes official reserves denominated in the member’s (or monetary union’s) currency that are held by other monetary authorities that are not issuers of the relevant currency, foreign exchange turnover in the currency, and the sum of outstanding international bank liabilities and international debt securities denominated in the currency.
With this established grip in the global context, a depreciating renminbi will fuel a rising Bitcoin price - albeit minimally. This may be continuous if Goldman Sachs Group Inc’s warning that a rising amount of capital is exiting the country in yuan rather than in dollars is anything to go by.
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