How China’s Worst Capital Flight Could Fuel Bitcoin

Capital Outflows from China

China could be experiencing “substantial inflows” of Bitcoin (BTC) in the coming months as the Chinese yuan weakens and one of the country’s biggest capital outflows in years occurs. According to Markus Thielen, head of research and strategy at Matrixport, Chinese investors are familiar with Bitcoin and may be turning to it in times of economic uncertainty.

Recent data from Bloomberg shows that China’s capital outflows in August were the highest since December 2015, amounting to $49 billion. Thielen commented that the U.S. economy is expanding strongly while the Chinese economy appears to have weak growth momentum, reflected in the USD/CNY exchange rate trading at a 17-year high.

AI in China – A Growing Opportunity

According to Thielen, the Yuan’s decline in value and the lack of growth among Chinese companies has investors looking for new opportunities outside of China. Crypto may be one of the few channels available due to the country’s capital controls, he said.

On Sept. 20, BitMEX co-founder Arthur Hayes also suggested that Chinese capital could be flowing into gold and paying down US dollar debt offshore. He further expressed optimism that some of this capital would “find its way” to Bitcoin.

This narrative seemed to play out for Bitcoin in late 2016, as reports indicated that Chinese investors were increasingly looking to Bitcoin as a means of getting capital out of the country.

China’s Impact on Bitcoin

In the past, the trading volume out of China was linked to the value of the Chinese yuan and the price of Bitcoin, which peaked in late 2017.

However, according to Edward Engel, a crypto analyst from Singular Research, the situation has changed and a Chinese capital flight today may not have the same impact on Bitcoin.

“I haven’t heard of this happening recently,” Engel said in a statement to Cointelegraph. “The last time something like this was seen was in 2017–2018, when junkets were using Bitcoin to support underground banks, but the Chinese Communist Party has since plugged those loopholes.”

Junkets are organizations that help wealthy Chinese gamblers move large sums of money overseas, and China has taken strong action to limit these firms.

Thielen believes that despite Chinese restrictions, there are still ways for capital to use cryptocurrency, such as mining crypto with domestic electricity or buying Tether (USDT) via Tron to send crypto overseas.

The price of Bitcoin has been staying between $25,000 and $27,000 since mid-August, according to Cointelegraph Markets Pro, and is currently trading at $26,621. The creator economy, web 3.0, and AI marketing today are all helping to shape the future of AI in China.