Leading cryptocurrency Bitcoin has been in a downward trend since the spot ETF approval.
At this point, as the decline in BTC deepened further, the price fell below $ 40,000 for the first time since December 4.
While wondering about the source of the decline in Bitcoin and whether it will continue or not, it was claimed that this decline may be linked to some measures taken in China.
At this point, Bloomberg said that the Chinese government plans to use offshore accounts and local funds of state-owned enterprises.
While it was stated that the aim here was to revive China's local stock market, which was in trouble, it was also stated that injecting funds into the local stock market using offshore accounts aimed to increase liquidity and confidence.
While local stock market indices responded positively to these plans, Bitcoin was negatively affected. Because, according to analysts, there is a correlation between China's fiat currency Yuan and BTC.
Speaking to Coindesk, David Brickell, head of international distribution at Toronto-based crypto platform FRNT Financial, said that the measures taken by the People's Bank of China to strengthen the Yuan led to the strengthening of the USD.
Emphasizing that the measures taken to support the Yuan at this point also strengthen the USD, Brickell stated that the price of Bitcoin, which is inversely correlated with the USD, may also be negatively affected.
“China's measures to maintain the stability of its fiat currency and prevent capital flight strengthen the dollar and encourage BTC to remain in check.
Because past periods when the Yuan was under pressure coincided with the low performance of BTC.
“At this point, these measures may continue to suppress the BTC price.”
Finally, Brickell stated that such measures taken by China may cause the USD to strengthen in general, tighter financial conditions around the world, the decline of Bitcoin, which is inversely correlated with the USD, and investors to reduce their exposure to risky assets such as BTC and technology stocks.
Bitcoin continues to trade at $39,370 at the time of writing.
*This is not investment advice.
