The bitcoin price soared higher on Friday after US President Donald Trump announced another $300 billion tariffs on Chinese goods.
The world’s largest cryptocurrency touched the $10,527-high ahead of the European market open, posting up to 2.47 percent intraday gains. The upside action brought its weekly profit closer to 11 percent, accompanied by a decent rise in volume on spot exchanges. The move further influenced the rest of the cryptocurrency market to follow suit, with the combined altcoin market capitalization surging from $91.149 billion on July 29 to as high as $97.697 billion today.
Meanwhile, global markets felt the pressure of Trump’s announcement. The Asian equity markets posted more than 1.4 percent losses, while their European counterparts opened 1 percent lower on Friday morning. US Futures, at the time of this writing, were also erasing their Fed rate cut gains, indicating a weaker session for the Dow Jones Index, Nasdaq Composite Index, and S&P 500 Index this Friday.
The US Dollar Index also felt the heat of an escalating US-China trade war as it gave up its overnight gains to Trump’s tweets. It fell 0.14 percent to 98.23.
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
For Haven Sake
Analysts have been digging a possible correlation between the ongoing US-China trade dispute and bitcoin price. They believe the rising tensions between the two superpowers weaken their national currencies, especially the Chinese Yuan, which remains under a strict capital control imposed by the Chinese government.
Between May 5 – the day Trump announced that he would increase tariffs on Chinese imports – and June 26, the bitcoin price surged by more than 142 percent. The period also saw yuan tumbling to its six-month low after Beijing counterattacked Trump’s tariffs with its own.
The fundamentals are very same even today. Soon after Trump’s tweet yesterday, yuan took a beating and fell up to 0.83 percent against the dollar.
The correlation is not entirely accurate, believes Garrick Hileman, head of research at Blockchain.com. The London School of Economics researcher told SCMP in May that bitcoin price moves uniquely alongside yuan concerns.
“We can’t be 100 percent certain that bitcoin’s recent price increase is being driven by concerns over the trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation,” Hileman said.
But Brian Kelly of CNBC believes the correlation cannot be a coincidence. He tweeted shortly after Trump’s tariff threat an image showing very correlated price movements of yuan and bitcoin.
“Offshore Yuan and bitcoin moving together after additional tariff announcement. [It] does not appear to be [a] coincidence,” he stated.
— Brian Kelly (@BKBrianKelly) August 1, 2019
It is possible, if not entirely correct, that investors in China hedge into bitcoin as if its a haven asset. That could also be due to the cryptocurrency’s growing popularity as “digital gold.”