US president Donald Trump thinks he’s being smart but it could be that China ends up denting his re-election prospects and boosting bitcoin.
The US Federal Reserve not playing ball doesn’t help either – and the more he pushes the harder he makes it for Jay Powell to maintain his institutions independent standing – or at any rate its perceived independence.
All of this could be good news for bitcoin and crypto more generally.
Bitcoin has again pushed past $10,000, just when the balance
of analyst opinion was predicting a struggle to stay above that level.
If nothing else it would appear to confirm the notion that the key driver of the bitcoin price of late has been the Fed, trade wars (the plural is necessary) and mounting geopolitical and economic uncertainties more generally.
In case you hadn’t noticed, we’ve had 10 years of “unconventional”
monetary policy that has created a low-yield environment. Indeed, yields on
quality sovereign debt has been negative in a number of countries. To get a
return investors are being pushed into riskier assets and bitcoin has been a
beneficiary of this.
Central banks inflating away the value of the dollar and the
country itself indebting itself to the rest of the world are exactly the sort
of worries, especially in the US, that led to the birth of bitcoin in the first
Trade war the new normal for markets
Those worries will be mounting outside the world of crypto
with Trump’s latest tariff hike Twitter missive likely a dangerous misreading
of China. The US president still thinks he’s doing real estate deals where he
holds all the cards. It is leading him to compound his miscalculations and that’s
probably good for bitcoin.
Far from bullying China into a corner, Trump is likely to
discover that nationalism works both ways. China is already accelerating its “Made
in China” efforts – expect that to lead to expedited chip development and
manufacturing for one.
Also expect China to guard its lead in digital payments and
in that context to be studying and following closely Facebook’s Libra journey.
China already includes blockchain as one of the key
industries in what it sees as the Fourth Industrial revolution that is already upon
us, with 5G at its centre.
Policymakers in China are not going to be in a hurry to do a
trade deal with the US with a presidential election looming.
That means the realisation will dawn in equity and other
markets that the trade war could be the new normal and will likely spread,
notably in a fight between the US and the European Union over autos and US Big
Tech (Europe pretty much only has “small tech” although German cars have conquered
Then there’s the situation of sanctioned countries and individuals, which is behind the massive upsurge in usage of Tether as a proxy for the US dollar in trade over the Chinese-Russian border – it is another fissure in the global system into which crypto is seeping.
Bitcoin loves economic and political uncertainty
And we have to mention Hong Kong as it seems to be the
elephant n the room. Many commentators are reluctant to see a US hand behind
protests in Hong Kong. That’s fair enough as the evidence – beyond protesters waving
the stars and stripes – may appear scant. But in ruling circles in China and
the media it controls, it is the main theme for understanding what’s going on.
Hong Kong is emerging as the most dangerous front in the
China-US trade war. There are a lot of high net worth individuals in Hong Kong
who will be thinking through how to protect their wealth and bitcoin will part
of the conversation for an increasingly minority.
Trump wants to talk down the dollar but it is continuing to strengthen giving US exporters another headache to contend with. It also throws fuel on to the trade war fire. The yuan rose from 6.90 to 6.95 against the dollar yesterday.
If it touches 7.0 then the Chinese authorities may intervene (as they have done in the past) to stop the value falling further. At that point Trump could start tweeting about China being. Currency manipulator (he already has the euro in his sights). Incidentally, for Chinese investors a weakening yuan will add to the attractions of using bitcoin to store value and to get round capital controls.
This moment in history may not exactly turn out to be the
end of globalisation but it is certainly one in which countries are starting to
put up trade barriers while at the same time trying to protect established global
supply chains or reconfigure them – what better environment and time for a world
digital money cryptographically secured in a distributed architecture (bitcoin
not Libra) to show what it can do?
Bitcoin loves uncertainty – economic, geopolitical you name
it. However, the regulatory kind is a different matter and the hammering that
Libra has been getting is thought by some to have taken the shine off the June lift
it gave to the crypto market.
Doesn’t matter what happens to Libra – the cat is now out of the bag
But here too we should be careful not to fall in with
perceived wisdom that sees Libra’s woes weakening the general crypto outlook.
On the contrary, whatever happens with Libra the cat is now out of the bag. It doesn’t really matter whether Libra launches in the form envisaged in the whitepaper or if it even launches at all (although I think it will, somewhere in some form).
Zuckerberg has thrown a hand grenade into the laps of
regulators, governments and corporates.
The reaction to the Libra announcement is the telling thing.
To the uninitiated and sceptical it has shown the potential (and
risks) of crypto, even if stablecoins are something of a detour along the long and
winding road to the adoption of full-blown distributed, permissionless value exchange
Walmart to launch stablecoin?
Todays’ news that Walmart may lunch its own stablecoin will be just one of many such examples of other corporations being forced to respond to Facebook’s Libra as they look to leverage distributed ledger technology in their own businesses.
Facebook might be forgiven for seeing Walmart’s stablecoin
patent application with the US Patent and Trademark Office as an instance of
flattery through imitation.
Taken together, loose money policies, trade wars, the prospect of actual wars in the Middle East alongside the Libra effect and improving tech and adoption prospects of crypto itself, means a bullish.
Currently trading at $10,500 on Coinbase, target price going forward for bulls is $11,120, last seen on 20 July.