Could Bitcoin Benefit From A Trade War?
As the trade war continues and the Trump Administration continues to impose tariffs on goods from nations around the world, some market observers are understandably concerned.
The U.S. has initiated “the largest trade war in economic history,” China claimed earlier this month, according to The Wall Street Journal.
Could the ongoing tariffs, countertariffs and negotiations cause investors to flock to bitcoin, which has sometimes functioned as a safe-haven asset during periods of economic turmoil?
Analysts are split on how much the digital currency is benefiting from this ongoing situation.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Bitcoin and ‘Economic Uncertainty’
“Bitcoin was forged in the fires of economic uncertainty,” emphasized Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital.
“It was created in direct response to the shortcomings of the traditional financial system. It makes sense, then, that any event that highlights the potential vulnerabilities of a national currency also tends to magnify the strengths of a borderless currency such as Bitcoin.”
“The uncertainty created by a trade war between the U.S. and China could certainly catalyze Chinese citizens to increase their holdings of Bitcoin and other cryptocurrencies.”
Anatoly Berdnikov, founder and CEO of Bit.team, a decentralized P2P online cryptocurrency exchange, offered a similar point of view.
“Concerns about an escalating trade war with Trump and its implications for the Chinese economy” have been a “major catalyst” for Asian investors, who have been flocking to cryptocurrency since it is “seen as more resilient to inflationary pressures and the potential devaluation of the Chinese Yuan.”
Analysts Voice Their Doubts
Some market observers were not as convinced that the trade war is providing tailwinds for Bitcoin prices.
“I would agree that these concerns are a ‘factor,’ but not that they are a ‘major catalyst,'” said Tim Enneking, managing director of Crypto Asset Management.
“On the other hand, were a full-scale trade war to break out (in the form of immediate, high tariffs) and economies begin to suffer from that, then the effect would be more pronounced,” he added.
Sean Walsh, a partner at venture capital firm Redwood City Ventures, also emphasized that trade concerns may not be the single greatest factor affecting digital currency prices.
“While the intensifying global trade war(s) should be on the active investor’s radar, I believe the reemergence of rapid price inflation is a larger driver of recent cryptocurrency price appreciation,” he stated.
“I suppose the trade war could be driving demand for Bitcoin in certain Asian countries,” stated Walsh.
“However, I suspect that effect is relatively small, as the rationale for buying crypto because of a trade war is not particularly clear or direct.”
Scott Weatherill, chief risk manager of B2C2 Japan, also voiced his doubts.
“I don’t think it’s a major driver personally,” emphasizing that the “statement is fairly hard to back up with evidence.”
“If anything, I would suggest that people would find BTC attractive in that context as a trade war would heighten geopolitical risks.”
Disclosure: I own some Bitcoin, Bitcoin Cash and Ether.