The global financial markets might presently be running in the hopes that the ongoing trade war between the U.S. and China would end very soon. A lot of think pieces, analysis and expert opinions about the war and its possible effects on the world’s markets have been published with many having very gloomy predictions that can only be avoided if the war officially ends.
However, while the rest of the world is mourning or at least preparing to mourn since it looks like the war is unlikely to end anytime soon, the economic unrest might just be great for the cryptocurrency market.
Bitcoin Will Benefit From U.S.-China Trade War
Bitcoin hit its all-time high of almost $20,000 in December 2017, a period characterized by a lot of excitement and goodwill in the crypto industry. However, in 2018, a bear market hit the sector, biting so hard that prices dropped lower than $4,000. This crypto winter continued into 2019 until early April when things began to look up and between then and now, the asset has performed quite impressively in general, despite numerous pullbacks.
In May alone, regardless of the fact that Binance was hacked and lost 7,000 Bitcoins worth about $40 million at the time, the event didn’t shake the price as it continued to rise gaining almost 50%. When this happened, there were a lot of speculations and expert comments on the possible causes of the price surge. However, one reason that seemed to be talked about a lot was the possibility that the surge was a result of the economic tussle between the U.S. and China.
Christopher Vecchio, the Senior Currency Strategist for the DailyFX has stated that there has been an inverse connection between the world’s number one asset and the Chinese Yuan. He mentioned that the price did seem to rise as the Yuan dropped. Vecchio explains that:
“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.”
According to Vecchio, people are already looking for other ways to sidestep the regulations being put forward by both countries and this will definitely push people in the direction of Bitcoin. Regardless of this optimism, Vecchio points out that Bitcoin is unlikely to reach its previous all-time high except the trade war continues unresolved and the Yuan further weakens. He explained that this would probably make the Yuan drop to 7 against the dollar or probably lower.
“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.”
Between 2014 and now, the exchange rate between the USD and the Yuan has not gone past 6.95 but at the moment, its somewhere around 6.9042.
Further Exchange Rate Drop Would Cost China Greatly
Even though a frail Yuan might not excitedly be a wish for Bitcoin proponents, they certainly would welcome it with open arms because it would do wonders for Bitcoin. However, such a situation would be quite terrible for China.
A weak Yuan would make exports leaving China a lot cheaper and probably attract more business from the rest of the world but that situation might be nothing when compared to the fact that the country will lose a lot of current and potential investors.
In addition, it could make the failing negotiations a lot worse because it would seriously push the idea that China has been doing a lot of scheming and manipulations. The situation would also make it very difficult for Chinese institutions who have dollar loans as repayments would become awfully costly.
Baidu, colloquially called the “Google of China” has already recorded a significant rise in the number of search queries about Bitcoin.
- Source: First Appeared Here
- Published Time: 2019-06-06 17:25:10
The views and opinions expressed in the article Bitcoin Price in USD Could Hit Previous All-Time High if Ongoing USA-China Trade War Continues do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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