TechFlowPost has published a commentary by Daii arguing that the impact of a stronger Chinese yuan depends first on what an investor actually owns: dollar deposits and stablecoins are not the same thing as Bitcoin, Ether or U.S. tech stocks simply because all of them are quoted in dollars.
The article opens with a clear distinction. If an investor holds U.S. dollar deposits or dollar stablecoins, continued yuan appreciation would directly reduce returns when measured in yuan terms. If the holdings are Bitcoin, Ether or U.S. technology equities, the picture changes because dollar pricing does not make them pure dollar assets. It also says the call that the yuan could reach 5.5 by the end of 2031 should be treated as a forecast with conditions attached, not as a guaranteed settlement price five years from now.
How yuan appreciation changes the math for dollar assets
The piece sets out a framework for investors who convert yuan into dollars, buy a dollar-denominated asset, and then convert back into yuan later. In that setup, the total return in yuan is the combined result of the asset’s dollar return and the exchange-rate move.
It gives the formula as: yuan return = (1 + dollar asset return) × (ending exchange rate ÷ starting exchange rate) - 1, using the convention of how many yuan one dollar buys. Under that convention, the figure falls when the yuan appreciates.
The article then runs several scenarios. If the yuan appreciates 3% a year, the cumulative gain over five years would be about 14.1%. A dollar asset would need to rise about 16.4% over the period to offset the currency translation loss, implying an annualized dollar hurdle of about 3.1%. If the yuan appreciates 5% a year, the five-year cumulative gain would be about 22.6%, and the dollar asset would need to climb about 29.2% to break even in yuan terms, equivalent to an annualized hurdle of about 5.3%.
One example in the commentary assumes a dollar deposit yielding 4% annually while the yuan gains 5% over the same year. Ignoring taxes, fees and foreign-exchange costs, the return measured in yuan would be roughly negative 1.2%. The dollar balance would be larger, but the investor’s yuan purchasing power would be lower.
From there, the author argues that a high U.S. interest rate does not automatically mean holding dollars is better. Interest is income. Exchange rates reprice principal. Both need to be evaluated together. The piece also makes the opposite point: if the yuan does not strengthen as expected, or weakens for part of the path, investors who cut their dollar exposure too early would bear an opportunity cost.
The article also touches on the difficulty of forecasting currencies. It says classic research has long shown that many structural models struggle to beat a simple random-walk benchmark out of sample. Models may be more complex than they were forty years ago, but the number of variables shaping exchange rates has not become smaller. Growth differentials, interest-rate spreads, inflation, capital flows, terms of trade, risk appetite and policy responses can all alter the path. In that framing, 5.5 is useful for stress testing, but not as a trading instruction.
Bitcoin priced in dollars is not the same as holding dollars
The commentary then turns to crypto, describing one of the most common mistakes in the market as treating dollar quotation as dollar risk.
Its example is straightforward: if one Bitcoin is shown at $100,000, that does not mean the holder owns $100,000 in cash. The dollar is only the measuring unit. The actual risk factor is Bitcoin itself. The article refers to the Bitcoin white paper’s definition of a peer-to-peer electronic cash system and says the protocol does not promise a fixed dollar conversion value for one BTC. It also does not mechanically fall 5% just because the yuan has appreciated by 5%.
According to the piece, the bigger forces behind Bitcoin pricing are global liquidity, leverage, risk appetite, regulatory changes, market structure and crypto-specific supply and demand. For an investor whose liabilities are in yuan, the return on BTC in yuan terms is at least a combined result of BTC’s dollar return and moves in the dollar-yuan exchange rate.
It gives two numerical examples. If BTC rises 30% in dollar terms while the yuan appreciates 5%, the return measured in yuan would still be about 23.5%. In that case, the exchange rate is a drag, but not the main driver. If BTC falls 50% while the yuan appreciates 5%, the loss in yuan terms would be about 52.5%. Under a move like that, the article says, arguing over whether the yuan appreciated 3% or 5% misses the bigger source of damage.
The piece also cites simulations by the Bank for International Settlements using user data from major crypto platforms, saying they show large numbers of retail investors took losses as Bitcoin prices fell. The author’s takeaway is that for highly volatile crypto assets, entry price, position size and cycle timing are usually more dangerous than single-digit currency moves.
Still, the article does not dismiss the role of the yuan. If wages, rent, mortgage payments, taxes and future spending are all settled in yuan, then the yuan is the investor’s liability currency. Even if BTC rises, part of the portfolio will eventually need to be converted back into yuan for real-world spending. In that sense, the critical question is not what symbol a market app displays by default, but which currency the investor will actually spend later.
Stablecoins are the cleaner dollar exposure
The article says dollar stablecoins such as USDT and USDC are fundamentally different from BTC. Their purpose is to stay close to $1, so as long as the peg holds, owning stablecoins amounts to deliberately keeping dollar foreign-exchange exposure. If the yuan appreciates, the value of those holdings falls in yuan terms even if the token itself remains stable at $1.
It also points out that stablecoin holders do not automatically receive the income generated by reserve assets. Using USDC as an example, the commentary says the issuer discloses that reserves are mainly backed by highly liquid dollar assets and provides reserve information, but the fact that reserves earn income does not mean ordinary token holders have a direct claim on that income. What they own is the token and the redemption arrangement tied to it, not a fund share in the reserve portfolio.
From that starting point, the article lists five layers of risk for a China-based investor who holds stablecoins without any hedge for a long period:
- a decline in the dollar against the yuan;
- issuer risk or reserve-asset risk;
- custodian-bank risk and redemption-channel risk;
- exchange, wallet, cross-chain bridge or private-key risk;
- depegging and liquidity discounts during extreme market stress.
The piece says this is why the Financial Stability Board has issued regulatory recommendations aimed at global stablecoin arrangements. In its telling, stablecoins are not just digital dollars on a screen. They involve governance, reserve management, redemption rights, stabilization mechanisms, cross-border oversight and operational resilience.
The commentary also addresses a common argument in crypto circles: that placing stablecoins into DeFi for an 8% annualized yield is enough to offset yuan appreciation. It says that claim works only if the 8% can really be delivered over time with the same risk profile. In practice, DeFi yields may come from borrowing demand, market-making fees, token incentives, maturity mismatch or leverage, and each source carries a different failure mode.
In the author’s view, subtracting a 5% currency loss from an 8% protocol yield and declaring a 3% net gain assumes away smart-contract risk, liquidation risk, depegging risk, platform risk, cross-chain bridge risk and liquidity risk. The article’s conclusion on this point is blunt: high yield is not a currency hedge. It is another risk bill.
The real decision framework is not whether you believe Goldman Sachs
The fourth section lays out a three-part framework for deciding whether to keep dollar assets.
First, do you have explicit dollar liabilities? If the next few years include overseas tuition, dollar-denominated insurance premiums, living expenses abroad or business settlement needs in dollars, then keeping matching dollar assets is reasonable. The article frames that not as directional speculation but as liability matching. Its example is a person who knows they must pay $50,000 in tuition two years from now. Selling all dollar holdings today because of a bullish yuan view would amount to betting that tuition payment on where the exchange rate will be in two years.
Second, what kind of “dollar asset” do you actually own? The commentary lists demand deposits, time deposits, short-term Treasuries, long-term Treasuries, U.S. equities, dollar bond funds, stablecoins and dollar-quoted BTC, and says they do not sit on the same risk dimension. The first group is driven mainly by rates, duration, credit and foreign exchange. Stablecoins add issuance, redemption, custody and on-chain risk. BTC is dominated by crypto price risk. In other words, being quoted in dollars does not create a single asset class.
Third, can you survive being completely wrong? The author suggests running the portfolio through three scenarios: the yuan appreciates 5% a year, the yuan is broadly unchanged, or the yuan weakens in stages. If any one of those paths would force asset sales, prevent essential payments or damage basic living standards, then the problem is not forecast accuracy. The position size is already too large for the investor’s tolerance.
The article’s bottom line for crypto holders
In its final section, the commentary gives direct guidance for people active in crypto markets. Money needed for one to two years of daily living in yuan, it says, should not be kept in BTC, ETH, stablecoin yield products or centralized exchanges. It should sit in lower-risk yuan assets. The reasoning is practical: living expenses are not capital that should wait for a price doubling. They are insurance against being forced to sell into a crash.
Funds with a clear future use in dollars should be matched to dollar assets by amount and timing, rather than being unwound because of a single five-year exchange-rate forecast.
Stablecoin positions held without a specific dollar use case, especially as dry powder for future dip buying, should be recognized for what they are: a long-dollar position. The article says they need position limits, and any return calculation should subtract not only the translation loss caused by yuan appreciation but also the channel and counterparty risks attached to holding them.
For long-term BTC or ETH holders, the author says a forecast for yuan appreciation should not trigger a mechanical exit. The first question should be how large the crypto allocation is relative to total investable household assets. The second is whether the investor can withstand a drawdown of more than 50%. At that level of volatility, the article argues, exchange-rate risk is usually not the largest one.
The piece ends by recommending rebalancing rules over point forecasts. One example is to review the portfolio every six months. Another is to adjust only when net dollar exposure moves a certain distance away from the target allocation. The logic is that investors cannot reliably predict exchange rates, but they can put limits on how much damage a wrong call can do.
Its final point is that if the yuan does strengthen steadily over five years, unhedged dollar cash and stablecoin holders will face a clear cost. Dollar risk assets may still overcome that drag if returns are high enough, but dollar quotation does not grant immunity from yuan appreciation. And a bullish yuan view, the author says, is not a reason to crowd every fund back into any yuan-denominated asset. Currency strength does not guarantee gains in stocks, property or any other local asset.
The article closes with a line that sums up its framework: exchange rates decide which ruler you use to measure returns, while asset quality decides whether there is anything under that ruler in the first place.