Growing Population in China Views Bitcoin as a Safe Haven, Says BTCChina’s Greg Wolfson

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This week, the Chinese yuan has devalued to a four-year low against the U.S. dollar while BTC/CNY echange rate has risen from 1,633 yuan to 1,690.36 yuan. Is the devaluation of the Chinese yuan triggering a surge of bitcoin growth in China?

Not necessarily.

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“Generally, if bitcoin behaved like other commodities, it would decline in price with the devaluation of the Chinese yuan, since BTC would be more expensive in CNY terms, which would reduce overall market demand,” Greg Wolfson of BTCChina told Bitcoin Magazine. “In fact, for the past five years, we’ve seen a strong bear market in commodities, and part of that trend is driven by structural changes in China. Bitcoin prices have also declined over the same period, although it hasn’t been shown that this is correlated with traditional commodity indices.”

However, there are quite a few people in China who are enthusiastic about bitcoin and think of the digital currency as a stable alternative to the Chinese yuan. Some businesses purchase bitcoin due to its relatively high international exchange rates and to avoid times of economic uncertainty.

“The CNY devaluation is significant as a policy signal, but the actual devaluation wasn’t very large in relative terms,” Wolfson said. “However, there are a growing number of people who feel that bitcoin is a safe haven of sorts, analogous to the role that gold played historically. If this is true, economic turmoil in China could cause speculators and perhaps some businesses to buy more bitcoin in a ‘flight to safety.’ Bitcoin has some properties that make it attractive during times of economic uncertainty, and uncertainty in Chinese stock markets, foreign exchange rates, and the overall economy could create more demand for bitcoin and buoy prices.”

Bad Reputation

Despite the space of opportunity that the devaluation of the Chinese yuan has left open for bitcoin, the digital currency has been suffering from bad press in China. Due to a large number of bitcoin fraud/Ponzi schemes such as MyCoin and hacking incidents involving the digital currencies, bitcoin has been portrayed negatively in the general Chinese population, as a tool for illegal trades and programs.

“Chinese are highly skeptical of anything that could be perceived as a scam,” Wolfson told Bitcoin Magazine. “Bitcoin’s unclear legal status and its association with hacking, gambling and online dark markets have hurt its perceived legitimacy. We need to do a much better job with public relations, helping people understand bitcoin’s utility, and, most importantly, actually making it commercially useful to people.”

For bitcoin to reach mainstream adoption in China, Wolfson says that valid and relevant applications that make sense in China have to be developed. All payment systems, restrictions and regulations function in a unique way in China, and, therefore, it is hard to predict how Bitcoin will grow and gain traction as a payment method for domestic transactions.

However, Wolfson explained, “‘Mainstream adoption’ isn’t necessarily limited to payments. Given the amount of mining and exchange that occurs in China, bitcoin is arguably more mainstream in China than anywhere else in the world.”

Photo Christopher / Flickr (CC)

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