USD/CNY Forex Pair Indicates China May Be About To Get Out Of Bitcoin (BTC) 

The USD/CNY forex pair has had an interesting correlation with Bitcoin (BTC). Back in June, 2019 when the pair had printed a bull flag, the price of Bitcoin started to rally before the bull flag in USD/CNY had come to fruition. We saw the pair eventually invalidate that bull flag and decline further before moving up. We can observe on the daily chart how the price of Bitcoin then switched from a lead to lag correlation and waited for the big move in USD/CNY before it started to rally. It is no secret that China has played an important role in the price of Bitcoin (BTC) as most big investors (whales) and miners are based there. 

The relationship between the price of Bitcoin (BTC) and movements in USD/CNY is very straightforward. Investors in China with a Renminbi account worry about how their savings appreciate or depreciate relative to the US Dollar. So whenever we see a rise in USD/CNY, we see a rise in the [price of Bitcoin (BTC) because that is the easiest option for Chinese investors to get exposure to the US Dollar. They buy Bitcoin (BTC) and cash into stable coins. The correlation suggests that this has been going on for a long time now. When USD/CNY starts to decline, so does the price of Bitcoin (BTC). Now that USD/CNY has declined below the 200 day moving average and risks a decline below the 50% fib retracement level, there is a good chance that China is about to get out of the market once again. 

It makes a lot of sense for Chinese investors to be getting out of Bitcoin considering they are aware of the next major decline that is about to set in. Most of these big players are either miners or exchanges or closely connected to them so they know what is going on. If the US Dollar is falling against the Chinese Yuan, they don’t feel compelled to get into Bitcoin (BTC). 

The daily chart for Bitcoin dominance (BTC.D) shows what really stands between Bitcoin and the next downtrend. The 72.22% level is what we need to keep our eyes on. If Bitcoin dominance (BTC.D) breaks past that level, we can expect a strong uptrend in Bitcoin dominance (BTC.D) which would coincide with a decline in the cryptocurrency market as Bitcoin would be holding its ground better compared to other coins. Now that the US-Iran conflict has simmered down, the big players have no pretense to pump the price of Bitcoin (BTC) further because Gold, the top safe haven asset has also topped out and begun a downtrend.