Trade tensions drive Chinese crypto demand
Euro zone bond yields rise from record lows
Trade tensions between the United States and China and a weakening yuan are boosting demand for cryptocurrencies among Chinese investors, market players from Asia to New York said.
Exchanges, researchers and brokers told Reuters they have seen an uptick in activity at crypto trading venues popular with Chinese. They said over-the-counter (OTC) brokers, which act as middlemen for buyers and sellers, have seen much of the activity.
Measuring crypto trading volume in China or elsewhere is highly difficult.
While digital wallets used to send and receive coins can be tracked on the blockchain technology that underpins most coins, the geographical location of senders cannot. And the Chinese government's 2017 ban on crypto platforms means there is little data on the sector in the country.
Still, the impact of the U.SSino trade war on China's economy and its falling currency are driving some larger investors to shift money from the yuan to cryptocurrencies, said Andy Chung, head of operations at OKEx, a Maltabased platform popular among Chinese.
China's economy has been hit by simmering trade tensions between Washington and Beijing. Data on Wednesday showed the slowest growth for Chinese industrial output in 17 years, suggesting tariffs are impacting demand in the world's second-largest economy.
And last week, China allowed the yuan to break through the key 7-per-dollar level for the first time since 2008, prompting Washington to label Beijing a currency manipulator and upsetting markets.
The yuan's sharp fall on Aug. 5 coincided with a 7% gain for bitcoin and a 9% surge in cryptocurrencies' market capitalization, leading analysts to speculate that some Chinese investors were selling the yuan and buying digital currencies.
"People worry about not just the yuan but the overall economy in China. We see a lot of internet companies freezing hiring, and they are actually laying off people already because of the trade war," said Chung, who is based in Hong Kong.
China maintains heavy capital controls, leaving few options for Chinese people seeking to move money offshore. That means cryptocurrencies are, in theory, an attractive vehicle for moving assets out of China.
Indeed, there has been a correlation between a weaker yuan and stronger bitcoin during times of lower volatility in crypto markets this year.
Mati Greenspan, an analyst at the eToro exchange, said as the U.S. dollar surpassed 7 yuan the venue saw significant increases in crypto and commodities trading, alongside a moderate drop-off in stocks and fiat currency volumes.
"Crypto assets saw a particularly pronounced spike on the day of the People's Bank of China's (yuan) decision: Volumes across all cryptos on eToro's trading platform doubled from their levels a week prior, both globally and in China and Hong Kong," he added.
Long-dated bond yields in the euro zone shot higher on Monday on the back of a calmer tone in world markets and increased expectations for fiscal stimulus in Germany.
Germany has the fiscal strength to counter any future economic crisis "with full force", Finance Minister Olaf Scholz said, suggesting Berlin could provide up to 50 billion euros ($55b) of extra spending.
That followed a report that Germany was prepared to ditch its balanced budget rule and take on new debt to counter a possible recession, pushing bond yields higher.
Firmer sentiment in equity markets and a report that the U.S. Treasury is considering issuing 50 or 100-year bonds also provided an opportunity for bond investors to take profits on recent hefty price gains, analysts said.
Thirty-year bond yields across the single currency bloc were up 9-10 basis points on the day. Germany's 30-year bond yield was on track for its biggest one-day jump since 2017, rising to -0.11% DE30YT=RR.