July was the first blood month period for Bitcoin in 2019. Recall that on July 1, BTC traded at $ 11,300, but the main cryptocurrency has dropped below $ 10,000 by the end of the month. However, Bitcoin jumped above an important mark on the chart again in early August. This event has happened for such a reason.
China – United States Trade War is Gaining Momentum
Ignoring the advantages of open trade, both governments alternately levy import duties and raise non-tariff barriers. As a result, export-oriented industries, consumers and shares of many companies are under the slogan of protecting the national producer.
There is an opinion that Trump’s trade war will accelerate the arrival of a new financial and economic crisis. At the same Binance, analysts note an upward BTC trend together with multiple safe-haven assets. Gold, the Japanese Yen, the Swiss Franc, and US 10-year Treasury Bill immediately grew after Donald Trump’s tweet.
$BTC has rallied 📈 together with multiple safe-haven assets after Trump's latest tariff storm.
— Binance Research (@BinanceResearch) August 2, 2019
At the same time, more risky assets have dropped – the Chinese Yuan, the Dow Jones Industrial Average (DJIA), NASDAQ 100, FTSE China A50 and WTI Crude Oil.
In a tweet published on August 1, Trump regretted that three months ago, China and the United States almost came to a common denominator and were ready to sign a trade agreement. However, China decided to change the rules of the game.
Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to…
— Donald J. Trump (@realDonaldTrump) August 1, 2019
Thus, the United States will begin the incidence of a new 10% tax on Chinese goods worth $ 300 billion on September 1.
The conclusion suggests itself that the recent Fed decision to lower the base rate is most likely due not so much to macroeconomic factors as to the desire to make US exports more competitive in the context of a trade war with China, the end of which hardly expected soon.
The above price dynamics of some assets demonstrates that, in the opinion of most investors, increased protectionism is fraught with risks of global instability. Therefore, market participants prefer safe-haven assets instead of risky ones.
“Will the trade war continues to be a catalyst for Bitcoin’s price growth??” asks the Binance Research experts.
The demand for cryptocurrency is pushed by large-scale inflation and monetary restrictions in many countries, including Turkey, Argentina, and Venezuela. “Digital gold” acts not so much as an investment tool, but as a store of value in a crisis.
Investors are frequently considering cryptocurrencies as safeguarding assets that are not scared of duties or the interference of central banks in the operation of the market mechanism. Bitcoin, as an uncorrelated asset, can perfectly add to the investment portfolio, which consists mainly of stocks, bonds, precious metals.
Given the decline in returns on traditional financial instruments, the Bitcoin demand will increase in developed countries.