Yuan Weakens Past Key Level, Boosting Bitcoin Bullish Outlook Amid Tariffs

China has allowed the yuan (CNY) to weaken past the crucial 7.2 mark against the U.S. dollar, signaling a potential shift toward a managed depreciation strategy. This move follows escalating trade tensions driven by former President Donald Trump’s aggressive tariffs. On Tuesday, the People's Bank of China (PBOC) set the daily yuan fix at 7.2038 per dollar—the lowest since September—suggesting Beijing may be prioritizing export competitiveness amid global economic pressure.

The yuan, unlike freely traded currencies such as the U.S. dollar or euro, is controlled by the PBOC and permitted to fluctuate within a 2% band around a central reference rate. Historically, the 7.2 level has served as a psychological floor, rarely breached. Analysts now believe China may allow a gradual devaluation to counterbalance the effects of tariffs.

Crypto market observers say this strategy could spark capital flight, potentially benefiting bitcoin (BTC). Markus Thielen of 10x Research noted that similar yuan devaluation in 2015 initially shocked markets but eventually fueled a 60% BTC rally. Ben Zhou, CEO of Bybit, echoed this sentiment, highlighting that yuan depreciation often correlates with increased BTC inflows from Chinese investors.

However, regulatory hurdles could limit this trend. China has ramped up crypto restrictions, requiring banks to flag suspicious crypto-linked international transfers. The Supreme People’s Court has also intensified legal risks for crypto-related money laundering, deterring capital outflows into digital assets.

While a weakening yuan could historically boost bitcoin, today’s tighter regulations may dampen that effect. Nevertheless, BTC’s reputation as a hedge during currency instability keeps investor interest high amid rising economic uncertainty.