China Devalues Yuan, Bitcoin To Da Moon

In the August 10th Crypto Trader Digest, I predicted the PBOC would devalue the Yuan to regain export competitiveness. Less than 24 hours after hitting the press, the PBOC shocked the market with a 1.9% devaluation. Global macro will be tilted on its head now that the world’s largest export regime is actively engaging in currency debasement.

The RMB is one of the largest globally traded currencies and it’s importance in global capital flows cannot be underestimated. Bitcoin, which is a financial and speculative asset, will be affected as well. Chinese households are now faced with a very painful question, how to protect and grow their saved capital.

Stock market and real estate investments have soured. Households are unable to invest abroad due to capital controls (the elite always could, but I am talking about regular folks). Due to a depreciating Yuan, imported goods will become more and more expensive. They must find a way to convert their paper wealth into real assets that cannot be devalued by the central government. Alternative means of investing will become more and more prevalent. P2P loans, wealth management products, and crypto currency will be three alternative areas where Chinese households will rush to convert Yuan into some form of wealth preserving asset.

The PBOC stated this was a one off devaluation. If anyone believes that, I have a ghost city in China to see you. China is mercantilism on steroids. Kuroda-san’s BOJ printing press will now go into overdrive. Mario Draghi will have no choice but use the cover of Grexit to unlease Euro QE. Each successive devaluation by its exporting peers will be met with force from the PBOC. Chinese speculators recognise this, and they will begin selling and borrowing CNY to buy any risk assets they can get their hands on.

It is time to back up the truck and buy buy buy Bitcoin. The $40 fall from $300 is a blessing. Coins can now be bought at much cheaper levels. To obtain long exposure, buy BitMEX December 2015 futures, XBTZ15.