Bitcoin (BTC) vs Gold (XAU) – How Trade Wars and Yuan Devaluation Are Shaping Markets

The 10-year US Treasury yield has spiked, which is unusual in a bearish equity market. Typically, long-term yields fall in such conditions as the Fed prepares to cut rates to support the economy. However, capital outflows from Treasury markets appear to drive higher yields. This points to an escalating trade war as the underlying cause.

The US has imposed tariffs totalling 54% on Chinese imports. In retaliation, China imposed 34% tariffs on US goods. President Trump recently threatened an additional 50% tariff, which would push total tariffs over 100%. This trade stance signals an inevitable trade war. The Chinese Communist Party is unlikely to back down. Investors are watching closely as the situation threatens global liquidity and economic stability.

Yuan Devaluation and Its Ripple Effects on Bitcoin (BTC)

The Chinese yuan has weakened significantly against the US dollar. The USD/CNY pair is breaking above the critical 7.35 level, as shown in the chart below. The emergence of an inverted head and shoulders pattern, followed by a breakout above 7.35, indicates sustained bullish momentum. The People’s Bank of China (PBoC) signals a shift toward managed depreciation.

This strategy aims to keep Chinese exports competitive despite rising tariffs. A weaker yuan may help offset the impact of US duties. In 2015, when China had significantly devalued the yuan, Bitcoin (BTC) surged in the following months. A similar trend could unfold now. The slight devaluation has already lifted risk sentiment and may encourage Chinese capital to flow into Bitcoin, repeating past behaviour.

However, bitcoin has shown signs of stress in the short term. It has declined since the White House announced a 104% tariff on China. This drop reflects broader concerns about declining global liquidity. However, historical patterns suggest that yuan weakness could later support Bitcoin.

Moreover, China’s current anti-crypto stance complicates capital movement into digital assets. In 2015, investors quickly shifted into crypto. However, that path faces more regulatory hurdles today. Despite these challenges, Bitcoin bulls remain optimistic.

Bitcoin (BTC) vs Gold (XAU) – Correlation Shifts and Market Sentiment

As global tensions increase, gold (XAU) prices strengthen due to rising international demand. However, the price decreased to below $3,000 amid overbought market conditions, and support was found at $2,950. The recent rebound in gold suggests that a break above $3,050 could trigger a continued upward rally.

Moreover, the weakening yuan and global inflation concerns add to gold’s appeal. Investors seeking stability amid currency volatility may continue rotating into gold. The strong gold price also reinforces the narrative that financial markets expect prolonged turbulence.

Bitcoin Correlation with Equities and the Role of Market Sentiment

Gold shows a slightly negative correlation with Bitcoin. The 30-day Pearson correlation indicates that Bitcoin has been tracking equity markets. It has maintained a strong positive correlation with the Nasdaq and S&P 500. This strong correlation highlights Bitcoin’s role as a risk asset rather than a safe haven.

On the other hand, Bitcoin’s correlation with gold has been volatile and often negative. As gold rises, Bitcoin does not follow the rally. This dynamic could shift if yuan depreciation intensifies and capital flows into alternative stores of value. Bitcoin may break existing correlation patterns and rally independently if crypto demand increases from Asia.

Moreover, the chart below shows that total net outflows reached $103.9 million, led by GBTC’s $74 million outflow. This reflects mixed sentiment and indicates cautious investor behaviour in response to market volatility and recent macroeconomic concerns.

Bitcoin-to-Gold Ratio Signals a Potential Buying Opportunity

The Bitcoin-to-Gold ratio is declining from 41, primarily due to a drop in bitcoin prices. This decline suggests that gold remains relatively strong compared to bitcoin. However, the ratio is still trading within a triangle pattern and is forming a cup-and-handle formation, which also signals underlying strength in the bitcoin market relative to gold.

The nearest support for the ratio is at 20. If the ratio reaches this level, it could indicate a strong buying opportunity for Bitcoin. Historically, this ratio has served as a reliable indicator for Bitcoin buyers.

Bitcoin (BTC) Technical Analysis

The weekly chart for Bitcoin shows that the price reached the $105,000 target but failed to close above this level weekly. This failure triggered a strong correction within the context of a bullish trend. The correction is approaching the support zone between $65,000 and $75,000, where a bounce is likely. Bitcoin continues to trade within an ascending channel, indicating strong bullish momentum. Additionally, the emergence of a cup pattern further supports the bullish outlook. A break above $105,000 would activate the next upside target.

Gold (XAU) Technical Analysis

The weekly chart for gold shows that it formed a bearish hammer at the record high last week and has corrected to the first support at $2,950. A break below $2,950 would signal further downside. However, the overall outlook remains strongly bullish, supported by the formation of an inverted head and shoulders pattern. The RSI remains overbought, reflecting an overextended price driven by trade war fears in recent months. A break above $3,050 would indicate further upside potential.