With US President Donald Trump imposing 104% tariffs on Chinese imports, Beijing is responding by letting the yuan weaken against the dollar — a move that analysts say could spark the next leg of the Bitcoin bull market.

On April 8, the yuan-to-US dollar exchange rate fell to its lowest level since 2023, signaling the Chinese central bank’s readiness to let its currency fluctuate more freely. 

The US dollar-to-yuan exchange rate on April 8. Source: Bloomberg

With the trade war ratcheting up, “expectation for China to eventually devalue the currency has jumped and the pressure won’t go away easily,” Ju Wang, head of Greater China FX at BNP Paribas, told Reuters.

The yuan’s devaluation could drive the narrative of Chinese capital flight into hard assets, which includes Bitcoin (BTC), according to BitMEX founder Arthur Hayes. 

Bybit’s co-founder and CEO, Ben Zhou, agreed, arguing that China will let the yuan weaken to counter the trade war. This means “a lot of Chinese capital flow into BTC, [which is] bullish for BTC,” said Zhou.

Source: Ben Zhou

Bybit is the world’s second-largest crypto exchange by volume and is a popular platform for derivatives traders. In December, the exchange said users in mainland China can now trade freely on the platform without the use of a VPN but that yuan trades are not permitted.

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Currency volatility is here to stay as US-China trade war heats up

Currency fluctuations are part and parcel of an escalating trade war that pits the two largest economies against each other. 

Beyond the yuan-dollar trade, investors are bracing for “insane” foreign exchange volatility tied to the trade war, according to Brent Donnelly, the president of Spectra FX Solutions. 

The US dollar has been in a steady decline since President Trump’s inauguration, with the DXY Dollar Index falling from a high of nearly 110 to the current sub-103 level. 

The decline between the end of February and early March was one of the sharpest moves in the last decade, according to Julien Bittel, who heads macro research at Global Macro Investor.

The DXY tracks the US dollar’s performance against a basket of six currencies, with the euro and Japanese yen having the largest weightings. 

The US dollar, as measured by the DXY, has weakened considerably in recent months. Source: MarketWatch

Historically, Bitcoin’s price has exhibited a strong inverse relationship with the US dollar, with a weaker greenback associated with a higher BTC price and vice versa.

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