Yuan Dumps, Bitcoin Jumps As China Researchers Suggest "One-Off Devaluation" & Capital Controls

Tyler Durden's picture

As we have detailed numerous times recently, the recent move in Bitcoin has been strongly suggesting increasing fears of capital controls and/or expectations of a looming (and quite notable) devaluation of the Yuan against the US Dollar. Tonight saw China's largest nationalist tabloid suggesting that China should consider one-off yuan devaluation to keep the currency stable at equilibrium level. Offshore Yuan is tumbling - to new record lows.

As we noted earlier, a quick look at the uncanny correlation between the decline in the Yuan and the rise in the bitcoin, confirms that the digital currency has indeed been largely used to evade capital controls. 

Based on this chart alone, the recent surge in Bitcoin would imply that a substantial devaluation of the yuan is looming. That, or even more aggressive capital controls.

And tonight, researchers with State Information Center led by Zhu Baoliang wrote in an article published on Shanghai Securities News, that China should consider one-off yuan devaluation to keep the currency stable at equilibrium level and suggest capital controls and as well as what seems like a reference to "virtual currency"...

...the effect of monetary policy continues to weaken. After repeatedly cut interest rates, lowering after registration, our short futures money market interest rates have dropped to about 2.2%, in the history of a relatively low level. Money supply growth rate far exceeds the rate of economic growth, social capital is abundant. But because of the lack of investment opportunities, more funds through the state-owned enterprises and financing platform to invest in less efficient infrastructure, or real estate, or idle in the virtual economy. Capital continues to off real to the virtual, will breed all kinds of asset bubbles, a huge impact on financial stability. At the same time, state-owned enterprises, financing platforms, real estate and other sectors and industries a large number of financing, but also pushed up the financing costs of financial markets, private enterprises and small and medium-sized enterprises to reduce the financing cost is not large, thus out of private investment.

 

...

 

It is suggested that the total social financing and broad money growth should be about 12%, and maintain a reasonable and reasonable liquidity scale. The second is to further improve the RMB exchange rate market-oriented level, and enhance the flexibility of the RMB exchange rate, or even a one-time devaluation of the renminbi, so as to maintain the stability of the RMB in the equilibrium level.

 

At the same time, the proper control of foreign exchange outflow, the state-owned enterprises in overseas real estate, antiques, teams and other non-substantive, non-technical M & A activities to be strictly limited. Third, closely tracking study American influence elected president's economic policies on China, the foreign exchange market volatility and prevent cross-border capital outflows triggered massive financial risk domestic bond market, the real estate market.

And for now the reaction is offshore Yuan selling to record lows...

 

And Bitcoin (in China) surging very close to record highs...

 

7,588 Yuan per Bitcoin in the record high and volume in this most recent surge is dramatically higher. But as we noted earlier, for those buying into bitcoin here on the momentum, most of which originates in China, we urge readers to be cautious as by now the PBOC has certainly noticed that the digital currency remains one of the final, and most successful, means of bypassing capital controls in China. Should Beijing mandate that bitcoin no longer be a means to illegally transfer capital offshore, there is risk of a dramatic, and sharp, drop in its price.

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FuckJanetYellen's picture

Those gooks are gonna pull it soon.

gatorengineer's picture

Telegraphing a one off devaluation is a great way to stem capital outflows.... 

kliguy38's picture

pure genius......so there is another agenda.....

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) kliguy38 Jan 2, 2017 10:39 PM

OMG! Moar Bitcoin! My Satoshi homo-boner just wrecked the new pants I got for Christmas!

https://localbitcoins.com

2_legs_bahhhhhd's picture

From your link, the buy price is 120$ more than the sell price. The spread on gold coins is about half that. Is everyone paying that kind of spread on BC?

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) 2_legs_bahhhhhd Jan 2, 2017 11:16 PM

I will admit that is a drawback about localbitcoins.com. You get a tighter spread at the exchanges.

Mustafa Kemal's picture

DD3, I had wondered how you had adjusted to the $1K BTC.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Mustafa Kemal Jan 3, 2017 12:19 AM

Price in USD is the least interesting thing about Bitcoin.

Dark Daze's picture
Dark Daze (not verified) FuckJanetYellen Jan 2, 2017 10:32 PM

Never understood the penchant for americans to keep seeking out another beating.

kochevnik's picture

Must be related to celebrating endless victories over the 50 wars they lost

jmack's picture

eh, monero's rise is more interesting than bitcoins...

BabaLooey's picture

The need for punching up headlines....

"Yuan Dumps, Bitcoin Jumps As China Researchers Suggest "One-Off Devaluation" & Capital Controls"

weak ......HERE'S some click bait....

"Bitcoin Pops, Yuan Poops, As Bejing Blowhards Bellow Basement Drop & The Mao Monetary Mombo"

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) jmack Jan 2, 2017 10:46 PM

Do not be deceived by false altcoins. Stick to teh light of Satoshi.

kochevnik's picture

Their software is too slow for my aged computer.  Cannot load the blockchain

buckstopshere's picture

Wait for the Chicoms to give the death penalty for users of Bitcoin and operators of Bitcoin nodes.

Weirdly's picture

And so they move to dash coin.  

SgtShaftoe's picture

Bitcoin doesn't have to be on the internet directly.  One could use packet radio, sneaker net, etc.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) buckstopshere Jan 2, 2017 10:39 PM

Yeah like that will ever happen.

buckstopshere's picture

A lot of people forget or don't know that Bitcoin's SHA-256 algorithm was designed by the NSA.

The NSA will not release an un-crackable method of encryption to the public.

Think about it.

Bitcoin was released to the public before the Snowden revelations of mass domestic surveillance. The NSA will be able to track Bitcoin transactions.

Dark Daze's picture
Dark Daze (not verified) buckstopshere Jan 2, 2017 9:25 PM

There are oodles of sites that will clean and secure you bitcoin, for a fee. And that is what Monero is all about anyhow. Untraceable.

gatorengineer's picture

Hey I got a bridge, actually two one is in brooklyn and the other is in San Francisco, want to buy either?  If you put money into an electronic currency you deserve everything that is comming....

Weirdly's picture

Just ignore the US Dollar is an electronic currency.

SgtShaftoe's picture

If you're really an engineer.  You should look at the block chain and how it works.  It's pretty elegant.  It's a currency.  Bitcoin is not gold but it's not the USD either.  I'd make a wager that bitcoin will continue to outperform the USD in spades over a 5 year period. 

Also, if you have USD in your wallet, you have no business climbing upon your mountain of judgement against bitcoin.  At least bitcoin is really and truly limited in quantity. 

gatorengineer's picture

I'm an engineer that knows a little about quantum computers and the ones the giverment has.... that's why I laugh at any encryption scheme that is secure....

 

I also am a firm believer in if you don't hold it you don't own it... so yes I understand digital fiat   is more worthless than physical fiat with which you could start a fire or wipe your ass.

Dark Daze's picture
Dark Daze (not verified) gatorengineer Jan 2, 2017 10:30 PM

I have lived all my life in a society where electronic currency has been in use for over 40 years. Never once had a problem, except for fraudsters in NY City. While in business I rarely, if ever, visited a branch. I rarely, if ever, had more than 40 bucks in my wallet - didn't need it.

It's only fucking loser Americans who don't want to or won't pay their fair share of taxes that are freaking about this. You don't trust your government, you don't trust the Chinese, you don't trust the Russians, you don't trust the Mexicans and you don't trust the Europeans.

Got a big news flash for you 'mr. engineer'. The world doesn't TRUST YOU.

gatorengineer's picture

The world shouldn't trust us why would they?  I belive almost none of what I hear and perhaps 10 percent of what I see.

Why Bother's picture

Taxation is theft. There is no fair share.

Not My Real Name's picture

It's only fucking loser Americans who don't want to or won't pay their fair share of taxes

Who the fuck are you to say what somebody's "fair share" of taxes is? 

Fuck you. Fucking parasite.  

 

 

SubjectivObject's picture

Well, at least he outed himself.  Easy now to keep an eye on the moniker.

messystateofaffairs's picture

Stockholm Syndrome, very common ailment afflicting the IQ challenged.

SgtShaftoe's picture

Yes, I'm familiar with those as well.  They don't seem to be working yet and there seems to be some serious issues.  I think it's telling that NIST and NSA have abandoned elliptic curve crypto entirely, and that FIPS 140-2 annex A still allows federal IT systems to run terrible crypto (3DES) as well as some of the more modern ciphers (AES).  I also find it interesting that the KG184s still haven't been replaced in a mad rush panic, nor any of the other COMSEC systems.  The assumption is that anything the US develops, China and others would also have the same technology about a month later, speaking of quantum computers. 

Bitcoin also accounts for upgrading the cipher at any point necessary.  I don't think that's a good argument. 

gatorengineer's picture

They were busting 64 bit in milliseconds in 2010.  I can't imagine where they are now.

buckstopshere's picture

Bitcoin is not anonymous.

Anonymous assumes pseudonymity, which Bitcoin offers with its public key hashes, and unlinkability.

Up until the Snowden revelations of mass domestic surveillance the unlinkability was assumed. It is clearly not a good assumption.

De-anonymizing can be achieved by analyzing activity patterns on a network. Once the public key hashes are matched to an individual user, all transactions ever made by that individual user will be publicly and permanently traceable, in the past, present, and future.

buckstopshere's picture

This means that if the Chicoms link a public key hash to an individual user involved in money laundering then all of the transactions ever made by that individual user will be traceable. The Chicoms will have all of the evidence it needs from the Bitcoin network using the linked public key hashes to give the money launderer the death penalty.

Mustafa Kemal's picture

If you put your bitcoin on a hardware wallet or paper wallet you can hold the bitcoin in your hands

buckstopshere's picture

You must not have heard of feather-forking attacks by large mining pools.

Once your public key hash is linked to you, you can be frozen out of future transactions by large mining pools.

De-anonymization algorithms are increasingly powerful with the advent of GPU-powered machine learning.

Bunga Bunga's picture

Large mining pools don't have a monopoly, they only dominating the block generation. There will be always miners, who do not block. It just takes longer to get your tx included.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Bunga Bunga Jan 3, 2017 1:41 AM

....and if a miner wants to be a bad actor, they will soon feel the wrath of the blockchain move against them!

buckstopshere's picture

Bitcoin mining operations are becoming centralized because of the massive power draw required to operate the miners and to cool the facility. The individual CPU, GPU, and FPGA miners are all out. The only economical miners in existence now are state-subsidized ASIC miners in large mining pools regulated and subsidized by central authorities.

The decentralized aspect of Bitcoin is disappearing.

Silver Glock's picture

if there are indeed quantum computers out there that can crack todays crypto then we have a bigger problem than just bitcoin... our cars, our airports, our banks, access control to government buildings, our priivate converstations using apps.... all of it is depending on the same technology and would thus be worthless... We are going back to castles and guns?

messystateofaffairs's picture

What do you think your USD bank account is? Fiat electronic money. I prefer specie electronic money.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) buckstopshere Jan 2, 2017 10:47 PM

Pretty much all computer technology we have today is ex-spook technology hand-me-downs. Your point is?

chuckymcgee's picture

SHA-256 isn't an encryption algorithm. You don't seem to understand cryptography or Bitcoin. Every Bitcoin transaction is already on a public ledger- the transaction itself isn't encrypted.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) chuckymcgee Jan 3, 2017 1:42 AM

correct, it's a hashing algo.

buckstopshere's picture

"Secure Hash Algorithm"

The transactions and the public key hash are public. Bitcoin relies on the Secure Hash Algorithm encryption to verify transactions. Linking the public key hash to an individual user is a weakness of Bitcoin that mixing services have tried to solve but cannot.

kochevnik's picture

What mixing services have been compromised?  Zero that I know

Bunga Bunga's picture

If the NSA has proven themself that it's crackable, then everyone could crack it, even the Russians. It would be a national security issue to use it,  but it is used, even in government communication equipment.

kochevnik's picture

You make baseless assertions.  Not intelligent

silverer's picture

Bitcoin races up because they don't have a mechanism to staunch its rise like they do with silver and gold. And yes, it's risky. Remains to be seen what Beijing will do.