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Bitcoin Maintains Its Strongest Price Since 2014 on Yuan’s Devaluations

December 15, 2016 at 16:59 by Yahia Barakah

The price of Bitcoin remained within a close proximity to its highest level since 2014, which was recorded on December 13. The digital currency is drawing support from a number of fundamental factors, including Chinese yuan’s devaluations and a ban on certain banknotes in India.

The government in China is attempting to limit a rapid outflow of capital that’s draining foreign reserves at the People’s Bank of China. Foreign reserves in the country dropped by $69.1 billion in November, pushing total foreign reserve losses to $500 billion in 2016. The Chinese government is introducing new measures to control capital outflow, including increased restrictions on foreign investment and limits on gold imports.

The outflow of cash from the country is happening at a time when the yuan is trading at its lowest level in more than a decade against the US dollar. This is reducing the Chinese currency’s ability to be a viable option for repaying borrowed debt. Investors in China are rushing to any safe haven asset they can still access, and many of them find the needed safety in Bitcoin’s decentralized blockchain network.

The continued outflow from China is creating a feedback loop that forces the yuan lower, thus increasing outflow even more. Due to these factors, the nation’s demand for Bitcoin is expected to keep rising, which will further support the digital currency’s price.

Meanwhile, a sudden ban on large denomination banknotes in India sent investors into a disarray, as they worried further sudden decisions from the government could hurt the value of their cash. The increasing strength of the US dollar led emerging market investors to look for an alternative to store the value of their cash, which increased the popularity of Bitcoin.

BTC/USD traded at 778.0 as of 16:41 GMT on Thursday, after touching 788.9 on December 13, the pair’s highest level since 2014. BTC/USD opened trading today at 777.3.

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