Why does the currency depreciate (Why has the currency been falling recently)?

Why does the currency depreciate? In the case of currency depreciation, people often experience some “pain”, such as the devaluation of the US dollar and the sharp decline in stock market prices caused by economic recession; due to the expansionary monetary policies of central banks and the tense situation in the international financial market, the appreciation rate of the Chinese yuan is slow, which affects the normal conduct of foreign exchange transactions. Therefore, when we talk about Bitcoin, many people consider it as a safe-haven asset, but is it really? In fact, it is a relatively stable investment value calculated based on the world population index and global economic growth rate.

So this article analyzes the reasons for currency depreciation from a macro perspective. First, it is important to understand why currency has such high volatility. If calculated based on current prices, it would be gold valued at less than $10,000 or real estate priced at around $20,000, which usually occurred in the late 1990s in the United States, Japan, and Germany at that time. Moreover, the GDP of these countries was higher than that of China 20 years ago. For a country, its growth is very fast, especially during the crisis in 2008. The current situation can be said to be not that scary. Secondly, there have been some extreme situations recently-after the outbreak of the coronavirus, various unexpected events occurred globally, including the global stock market crash, which has caused panic in many people.

Finally, combined with the following charts, it can be seen that many factors have a huge impact on the future economy. First, with the prevalence of COVID-19, many people are starting to worry about inflation. Second, as more and more people turn to invest in BTC and other cryptocurrencies, they may feel that they are in an overvalued state. Once they lose patience, they may easily fall into trouble and eventually die (although this is temporary). Third, in the past period of time, the whole world has been in a state of depression, and nothing has changed, which has caused a lot of selling pressure. Fourth, there is a saying that investors put their money into other places instead of buying more things to get more returns (there is actually a certain theoretical basis for this).

Why has the currency been falling recently?

The currency has been falling recently due to two reasons. First, after the speech by the newly appointed US Treasury Secretary Yellen on June 10, a series of news and rumors about the plunge in the prices of Bitcoin and other cryptocurrencies emerged. Second, after Federal Reserve Chairman Powell announced the suspension of interest rate hikes recently, there has been a significant decline in the market, and its impact on the economy is uncontrollable and may have negative consequences. Third, global central banks are unwilling to change their policies.