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Bitcoin Achieves Small Gains on Continued Yuan Devaluations

November 15, 2016 at 20:33 by Yahia Barakah

Bitcoin price rose on Tuesday to trade in close proximity to its last week’s levels as the People’s Bank of China continued devaluing its currency, to which Bitcoin has a strong correlation.

The value of the yuan touched its lowest level in eight years on Tuesday as the Chinese currency lengthened its accelerated drop against the US dollar, which started with Donald Trump’s victory in the US presidential election. The Chinese central bank, which assigns daily fixings for the price of the yuan, tolerated the depreciation of its currency for eight consecutive trading sessions against the dollar as the greenback enjoyed its global surge.

Even with today’s gains, Bitcoin remains behind its recent highs that it reached before to the US elections. The digital currency is behaving as a safe haven, thus has been unable to return to its previous levels. However, Bitcoin could be supported by the Indian demand for haven assets, which is on the rise following the surprising decision from India’s Prime Minster Narendra Modi to ban the 500 and 1,000 rupee bills. Modi’s move aims to stop counterfeit money, however it affects 86% of the cash in the country.

Meanwhile, Bitcoin enthusiasts are eyeing the signaling for Segregated Witness, which starts on Wednesday. The solution that was proposed by the Bitcoin Core developers targets the virtual currency’s block size problem and enables it to have a better ability to scale. Once the signaling starts, the network will need to reach 95% consensus for SegWit to be activated, a target that can prove challenging to reach. A single large mining pool with a size similar to the size of the Chinese ViaBTC pool can stop the activation of SegWit, unless the activation threshold is lowered.

BTC/USD traded at 714.4 as of 19:57 GMT, as the pair rose from its opening level at 704.9. BTC/USD touched 740.0 on November 9, before its downtrend took it to 684.7 on November 13.

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