The United States government is threatening to break the Hong Kong Dollar’s peg as retaliation for the Chinese takeover of Hong Kong. This would shatter the Hong Kong Dollar’s value, and could even lead to a currency collapse, and this has the potential to spark a massive wave of capital flight into Bitcoin.
As discussed in a previous article on BitcoinNews.com, Hong Kong has been in chaos for a prolonged period of time due to a potential extradition law, which would deport Hong Kong citizens to mainland China, where they would be judged under Chinese laws. This would undermine the entire Hong Kong justice system, as well as significantly reduce the sovereignty of Hong Kong.
Now the extradition law has become a reality with the passage of a new ‘National Security law’. Hong Kong citizens can be deported to mainland China, and even worse will face closed trials, giving the government of China total control over Hong Kong citizens. Also, it has become illegal to say anything against the Chinese government, so the masses of rioters in Hong Kong now face arrest just for their thoughts and speech, and indeed arrests are already happening.
Essentially, Hong Kong is no longer sovereign, and the Chinese government has taken complete control. This is already resulting in a flight of people and money from Hong Kong, as residents try to escape before it is too late. This capital flight from Hong Kong has been increasing Bitcoin buying pressure for months, since Bitcoin is one of the best ways to hide money or send money overseas, since Bitcoin is cryptographically secure, immutable, instant, and decentralized.
The United States shattering the Hong Kong Dollar as revenge for the Chinese takeover of Hong Kong could initiate the last, and perhaps biggest, phase of capital flight from Hong Kong. If it happens, Hong Kong residents will be desperate to convert their funds to other major fiat currencies, as well as Bitcoin and precious metals, before the Hong Kong Dollar loses all of its value.
Indeed, if the United States purposely attacks the Hong Kong Dollar it could lead to a complete currency collapse of the Hong Kong Dollar.
The Hong Kong Dollar has been pegged to the USD for decades, and currently has a peg of 7.80 Hong Kong Dollars per USD. This peg has been maintained by a continuous and massive influx of foreign capital into Hong Kong, so if the United States is going to attack the Hong Kong Dollar, they will likely sanction Hong Kong in order to disrupt the flow of foreign capital.
Therefore, when the United States says they are going to unpeg the Hong Kong Dollar, they are also equivalently saying that they are going to shatter the Hong Kong economy with sanctions.
On a side note, it doesn’t make much sense that the United States would destroy the Hong Kong economy and its native fiat currency, since this only serves to further punish Hong Kong residents who are already suffering due to their loss of sovereignty. In-fact, if the United States does this, it will greatly benefit the government of China, since China is trying to get rid of the USD anyways, and China will have the opportunity to replace the USD-backed Hong Kong Dollar with the Chinese Yuan.
In any case, it seems likely that the United States will sanction Hong Kong and attack the Hong Kong Dollar, and this could lead to a major Bitcoin rally as Hong Kong residents rush to convert their Hong Kong Dollars before it becomes worthless.
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