More Chinese Monetary Policy: Renminbi Depreciates Further

The People's Bank of China (PBOC) has loosened the band that the renminbi floats in further Easing monetary policy further as more bad economic data continues to pour out of China.  As the mentioned in the last blog post, yuan depreciation is bullish for bitcoin.

The chart above shows that it has risen above 6.40 which was where it spike to when back in August the PBOC allowed it float by a further 2%.  This is significant as it shows the PBOC is determined to get ahead of a Federal Reserve interest rate rise and to continue economic reforms which lead the mainland from an export driven economy to a consumer led economy.  With yuan depreciating and capital controls tightening in China, bitcoin has been used as a way to get money out of China. As the bitcoin price has risen, speculators have stepped in as well and momentum has propelled it higher.  This is even more obvious by looking at the spread widening between onshore yuan and offshore yuan as the chart below shows. 

This widening spread is bullish for bitcoin.

One final relationship to watch is between the Shanghai Composite and the price of bitcoin. It is uncanny how inversely they move, when one goes up the other goes down. A best guess would be that speculative money is shifting back and forth between them.  A lot momentum traders chasing returns after getting burned in the Shanghai and bitcoin earlier in the year.  The chart below is labeled with up and down arrows, showing this relationship.

Continue watching monetary policy out of China, particularly when it comes to the currency and as this loosening of the band continues, the bitcoin price should continue higher.