If you support China’s perspective on international affairs, you’ll recognize the ongoing trade war as the biggest in history. In reality, that figure is likely an exaggeration, but nevertheless, the China tariffs have severely impacted the economy. As such, financial analysts fear that troubles will boil over into the stock market. In that event, could bitcoin offer a solution?
On the surface, the theory makes logical sense. At the end of the day, bitcoin is a commodity. We can argue incessantly over its true nature, but the investor largely treats cryptocurrencies like financial assets, such as gold. And similar to precious metals, bitcoin features a credibility factor. Because it’s decentralized, you cannot overtly manipulate BTC.
The China tariffs also add a distinctive wrinkle for cryptocurrencies. In recent years, average Chinese families have worried that their central bank will devalue the yuan. As an exporter, China benefits from a weaker national currency. But in pursuing this tactic, individual citizens will helplessly watch their savings erode through “financial engineering.”
Prior to the rise of cryptocurrencies, Chinese investors would have chosen gold bullion for wealth-saving strategies. However, gold just isn’t as practical or fungible as bitcoin. Sure, bitcoin has its problems, but at least you don’t have to physically carry (and protect) heavy coins and bars.
But will Bitcoin Emerge from the China Tariffs Unscathed?
That said, I don’t believe that the China tariffs are necessarily net positive for bitcoin and cryptocurrencies. Protecting wealth is one thing. But if you have no means of attaining wealth, the idea of financial protection loses its luster.
This is the central problem with the China tariffs. Both the U.S. and the Asian juggernaut are going to suffer. But the reality is that the U.S. will, after getting stabbed numerous times, emerge victorious. We maintain the world’s reserve currency. More importantly, we operate the world’s greatest military force.
The Chinese won’t admit, but deep down, they know the truth. That’s part of the reason why their response to us have been measured, and not just in delivery. President Trump has always spoken arrogantly against China, and recently approved $200 billion worth of tariffs. China responded in “victim speak,” and responded with $60 billion levies.
Surely, the Chinese have the resources to up the ante, or to at least match the vitriol. Instead, they’re trying to salvage the situation, not angering the U.S. while the White House goes open season on them. In other words, China is responding from a position of weakness.
I dare say most Chinese investors are in no mood for speculating on bitcoin. Thus, I don’t see how the China tariffs would ultimately help BTC.