You may have noticed that trade wars are trending. The US versus China being one of the biggest and most reported, but not the only one. Panos Mourdoukoutas writing at Forbes suggests that these clashes over trade could make bitcoin and the leading altcoins a “safe haven” and send their prices skyrocketing.
Once upon a time gold was a safe haven for investors at times of strife, but has lost some of its appeal due to a strong US dollar and what is called a high “carry” cost.
The US Treasury is another safe haven, but China is holding over one trillion dollars of treasury notes and if things take a further dive between Trump and Xi, then the Chinese may well decide to crash the market, using it as a weapon against the USA.
Mourdoukoutas believes that this leaves us with cryptocurrencies as the place to store money while the trade wars continue. Although, he does point out that there is a high element of risk involved in this strategy.
He also claims that other experts on the markets agree that cryptocurrencies have already been boosted by the trade war to date. Nisa Amoils, a venture capitalist with New York Angels said, “While infrastructure build-out and Facebook’s Libra have validated the space in recent months, this continues to be a macro story. The largest catalyst continues to be the deteriorating global macro backdrop, which continues to support digital assets, especially Bitcoin and to a lesser extent the innovative ‘decentralized finance’ movement occurring on top of the Ethereum protocol.”
Amoil agrees that cryptocurrencies are pushing gold into the background and that bitcoin is “digital gold”, a view held by some, but not by everyone.
Deric Scott, Vice President of Metals.com said, “Gold is universally accepted as currency around the world and has been for nearly 6,000 years. It’s tangibility and anonymity make it very appealing for people looking to retain what little shred of privacy we as a collective society still have.”
Scott also thinks that gold is superior to crypto because it doesn’t rely on the Internet, saying, “it’s a nice way to store wealth that is still accessible even when the power or Wifi is out.” It’s a point, but not one that techie people are likely to take very seriously.
Mourdokoutas also refers to the fact that central banks are getting ready for another round of easing, and that could be positive for speculative assets, including major cryptocurrencies. This could push the prices to new highs, simply because cryptocurrencies have a limited supply.
It all makes watching the trade war news even more interesting if you’re a cryptocurrency owner.