China’s Currency Policy Pushes Bitcoin Past $700 as Investors Seek Shelter From Yuan Devaluation

On October 31, 2016, Bitcoin closed the month at $700.97, marking a 14.9% gain for October alone. The rally was largely fueled by the ongoing devaluation of the Chinese yuan, which drove waves of investors toward the world’s first decentralized cryptocurrency as a hedge against eroding fiat purchasing power.

TL;DR

• Bitcoin closed October 2016 at $700.97, up nearly 15% for the month
• Chinese yuan devaluation was the primary catalyst for the price surge
• Chinese Bitcoin advocate Huang Shiliang addressed scaling at a Chengdu mining conference
• AT&T filed patents related to Bitcoin server technology, signaling corporate interest
• The Block size debate between Bitcoin Core and Bitcoin Unlimited intensified

Yuan Weakness Becomes Bitcoin’s Strength

The Chinese yuan had been under sustained pressure throughout 2016, with the People’s Bank of China (PBOC) allowing gradual depreciation against the US dollar. For Chinese investors and savers, this meant a steady erosion of their wealth in real terms. Bitcoin, with its fixed supply cap of 21 million coins, offered an appealing alternative — a store of value that no central bank could dilute.

On October 31, Bitcoin’s market capitalization stood at approximately $11.18 billion, with 24-hour trading volume reaching $97 million. The price action was overwhelmingly driven by Chinese exchanges, where volume consistently outpaced Western platforms. At the time, Chinese yuan-denominated Bitcoin trading accounted for the majority of global volume, underscoring the outsized role that Chinese monetary policy played in shaping cryptocurrency markets.

Scaling Debate Takes Center Stage

While the yuan devaluation provided the macroeconomic backdrop, the Bitcoin community was locked in an increasingly heated technical debate about the network’s future. At a mining conference in Chengdu, prominent Chinese Bitcoin advocate Huang Shiliang addressed the community’s scaling concerns, discussing proposals to increase Bitcoin’s transaction throughput beyond the existing 1MB block size limit.

That limit, which effectively capped the network at roughly 3 to 6 transactions per second, had become a flashpoint between two rival factions. Bitcoin Core, the original development team, favored conservative, layered solutions. Bitcoin Unlimited advocated for larger blocks as a more immediate fix.

Charles Hayter, CEO of CryptoCompare, framed the conflict as both technical and philosophical: “Bitcoin Core is a developer-based group who prefer elegant solutions to problems than rough and ready workarounds. Bitcoin Unlimited are the challengers to the status quo in what is not only a battle for the next steps, but a battle for power and shaping the industry on philosophical tenets.”

Corporate Interest: AT&T Enters the Frame

Adding to the bullish sentiment, telecommunications giant AT&T was reportedly seeking patents related to Bitcoin server technology. The move was seen as an early signal that major corporations were beginning to explore Bitcoin infrastructure — particularly for enabling microtransactions. If adopted at scale, corporate-backed Bitcoin infrastructure could dramatically expand the network’s utility beyond speculative trading and into everyday payments.

A Broader Shift in Monetary Thinking

The events of late October 2016 illustrated a pattern that would repeat throughout Bitcoin’s history: when traditional monetary systems showed signs of stress, capital flowed into decentralized alternatives. China’s managed currency devaluation was, in effect, a real-world advertisement for Bitcoin’s core value proposition — a money supply that no government could arbitrarily expand.

The rest of the crypto market reflected mixed sentiment. Ethereum traded at $11.00 with a market cap of $940 million, down 2.15% over 24 hours. Litecoin held at $3.99, while Monero experienced a sharper decline of 8%, trading at $5.12. Only NEO stood out as a notable gainer, surging 27% on the day to $0.23.

Why This Matters

The October 2016 rally past $700 was more than a price milestone — it was a proof of concept. It demonstrated that Bitcoin could function as a hedge against sovereign currency risk, a role that would become increasingly important in subsequent years as more countries faced inflation, capital controls, and monetary instability. The scaling debate, meanwhile, foreshadowed the contentious forks and governance challenges that would shape Bitcoin’s evolution. And AT&T’s patent explorations hinted at the corporate adoption wave that was still years away but already on the horizon.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research before making investment decisions.