What the US-China Trade War Means to Bitcoin and Crypto

by Albert Kim

Bitcoin halving in a year aside, the trade war pitting the US, and China appears to be taking center stage at least for now. As the halving nears, the BTC price is poised to head north as the trade war continues to give the investor confidence in investing in crypto with Bitcoin being the gainer.

During the trade war, Bitcoin has outperformed other traditional wealth backed assets according to the American digital asset manager, Greyscale. According to the firm, BTC grew by 47% between 5th and 31st of May beating the best traditional performing asset, the Japanese YEN which gained a paltry 2.1%

Depreciation of the Chinese Yuan

On the global equities, the Nasdaq Composite Index dropped 8.7%, which makes it the worst performance in recent times. The devaluation of the Chinese Yuan appears to be a big boost for Bitcoin, leading to the digital coins recent bull-run. The trade war has caused a lot of uncertainty in the local market leading to the depreciation of the Yuan.

According to the Greyscale director of Investments and research, Mathew Beck:

“While the drawdown appears to be in its very early stages, Bitcoin is getting a jump before these risks are fully reflected in other asset prices.”

Read also: Blockchain Could Reduce Losses From Bank Fraud by $9 Billion a Year

Bitcoin is yet to Come of Age

Crypto and in particular, Bitcoin is still very young, but the ripple effect being exhibited during the trade war is a clear indication the digital coin has the potential in the future. The currency is only capitalizing on the geographical instability, and there is a lot to come shortly adds Beck:

“While it is still very early in Bitcoin’s life cycle as an investable asset, we have identified evidence supporting the notion that it can serve as a hedge in a global liquidity crisis, particularly those that result in subsequent currency devaluations.”

Bitcoin April Surge and May FoMo

In early April there was a BTC price surge amid speculation that the coin was headed to a bull-run. Those who have been watching the coin jumped in due to the fear of missing out (FoMo) fever. The ensuing price spike was nonpolitical and had nothing to do with the US-China trade war.

Adding his voice to the current state of Bitcoin and Yuan, a senior currency strategist at DailyFX,  Christopher Vecchio says of late, Bitcoin was inversely correlated to the Yuan and to move value globally, the BTV price has appreciated while that of the Yuan has weakened. He goes on to add:

“In an environment where the global financial system looks like it is potentially at risk because of the world’s two largest economies going at odds, people may be looking for alternative avenues to find ways to circumvent the capital controls being put in place to move their money around without the Chinese or U.S. government taking stock of it.”

Is Bitcoin History Repeating Itself?

It is not likely that the Bitcoin high of $20,000 is expected to occur this year. However, should the US-China war get out of hand, the Yuan will continue to weaken further, and BTC will gain also.

”Dollar-yuan going past seven would be a kind of ‘world on fire’ type of event. Chinese policy makers control their currency rates so moving it beyond seven would be seen as effectively an escalation of the trade war to a new realm altogether.”

In as much as there emerging altcoins in the crypto verse, Bitcoin has the potential to surge past the $10,000 mark. It is possible that trade wars are unlikely to affect decentralized assets, and the effects will be felt in the US and China as ‘epicenters’ before the impact of ripple spreading globally.

The past few months have proven that Bitcoin and the broader crypto players can play the save haven assets when mainstream economies are headed south. The stock decline after threatened to raise tariffs on US goods is a good move that has put BTC to test and has proved it can, in the future, be the alternative currency, thanks to Satoshi Nakamoto.

Related Posts