Could the US-China trade war be revolutionizing Bitcoin into a safe haven asset?
The equity and currency markets have suffered one of the worst hits in history due to the ongoing tensions between Washington and Beijing. However, Bitcoin seems to be taking every advantage of this situation especially due to its decentralized nature.
Since Bitcoin is a decentralized digital currency, the trade war between the two great economies, the USA and China, does not affect it. Bitcoin is not tagged to any government. It is used in both countries and no central bank can assert authority on it.
Although cryptocurrencies are uncorrelated to the currency markets, the weakening of Beijing's Yuan has sent the Asian investors into a frenzy of looking for alternative assets to invest in. Bitcoin stands the best chance since it is currently the most valued compared to the rest of the Asian fiat currencies. Again, when Beijing is attacked, the whole of Asia's economy is shaken meaning most of the other currencies are also suffering just like the Yuan.
Bitcoin has joined the likes of gold and silver, which are the most sought after safe haven assets in times of political or economic instability. Currently, the price of a single Bitcoin (BTC) coin is about USD 10,500, while the price of one ounce of gold is USD 1,500. From the figures, it is clear that Bitcoin has proven to be the better choice especially since investors also know of its capabilities. In 2017, the price of Bitcoin was almost hitting USD 20,000 per coin and the current trend seems to be taking the coin back to this lost glory.
Compared to the track record of the yellow metal, gold, which has had a year to year gain of about 16%, Bitcoin has made a 183% rise in just a period of 8 months.
There are fears that there would be a full-scale trade war between Beijing and Washington and this has given investors a reason to abandon investing in the fiat currencies of these two superpowers and economy giant and instead invest in decentralized currencies like Bitcoin.
A good indicator that investors are running away from the US market is the 30-year yield on US treasury securities which has dropped to about 2.15%, which is not very far from the record low of 2.09%. This is definitely a sign that investors are not currently willing to invest their money in assets that they don't consider safe from the current economic turmoil.
Though there is great anticipation that things will cool down after the upcoming September talks between the two powers, there is fear that this might not work judging by the results of their last meeting. Their last talks resulted in Washington imposing a 10% tariff on Chinese imports and also called China a currency manipulator while the Asian country retaliated by burning the US agricultural imports.
Amid all these confrontations, Bitcoin and other cryptocurrencies have been perceived to be better safe haven assets.