Has the Trade War Minted Bitcoin as the New Gold?

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The end of 2017 was a whirlwind for cryptos.

Every second headline was shouting about how ‘Crypto Could Hit 1 Million!’ or hurriedly explaining ‘How You Could Become a Newly Minted Crypto Millionaire’.

The roaring optimism carried over into the New Year. And as the champagne bottles popped open and the clock ticked over to midnight, bitcoin was inching ever closer to an all-time high.

But the excited heard of bulls that drove the bitcoin price to nearly US$20,000 at the beginning of 2018 are now nowhere to be seen. And scepticism has settled in as the default attitude towards anything crypto related.

Of course, expectations were too high to begin with. Like most tech booms, crypto’s debut into the mainstream was jarring to say the least. Moving rapidly from a niche tech concept that only fringe communities knew of, to an investment extravaganza everyone was scrambling to get in on.

But everything that goes up, must come down. And the crash that followed the bubble burst was dramatic to say the least. In January 2018, bitcoin fell by more than $44 billion in value. It tumbled 10% from its high of $20,000 in 2017 to a measly $9,000. And other smaller alt-coins soon followed suit.

In the wake of that momentous crash, the world of crypto has been quiet for some months now. But now that we’re in the midst of global uncertainty, with the US–China trade war constantly looming in the horizon, people are beginning to wake up to the fact that state-backed commodities aren’t so stable after all.

Bitcoin, which has long presented a threat to the current financial system and the central banks that back it, has once again come out of the shadows.

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Another boom for bitcoin?

After bottoming in the $3,200 range in mid-Dec 2018, the crypto has rallied to a 10-month high of around US$8,000 at time of writing — perhaps foreshadowing another period of glory.

According to CoinMarketCap, the past weekend also saw bitcoin’s trading volume hit unprecedented highs with $30 billion traded on Saturday, followed by $29 billion on Sunday. The 24-hour trading volume for BTC is a currently sitting at $28 billion.

Leigh Travers, who is the CEO of the world’s first publicly listed blockchain company DigitalX, believes Donald Trump’s recent escalation of the trade war is the driving reason behind the crypto’s rise:

Chinese and expatriate Chinese around the world are contributing to the recent rise in the price of Bitcoin. They are seeing Bitcoin as a hedge against the falling Yuan.’

And considering that the yuan has fallen to four-month lows against the US dollar, bitcoin is certainly looking more and more like a safe haven.

In yet another testament to the growing power and mass resurgence of cryptocurrencies, we’re now seeing major government figures and central bankers scrambling to de-legitimise this new form of currency.

US Democrat Congressman Brad Sherman, for example, warned congress that if bitcoin was left unchecked, it could have dire consequences for the financial world as we know it:

I look for colleagues to join with me in introducing a bill to outlaw cryptocurrency – the purchases by Americans – so that we nip this in the bud in part because an awful lot of our international power comes from the fact that the dollar is the standard unit of international finance and transactions.

No doubt we will see other major figures coming out of the shadows to slander crypto if it continues to rise, echoing the criticism we saw back in late 2017. But it’s important to remember that any attempts by governments to quell the rise of this technology only speaks to their bourgeoning power. And it’s likely to drive the price up even further.

When you look at bitcoin’s journey overall, this latest rally marks yet another incredible rise from the coin’s humble beginnings of $12 a coin back in the late 2000s.

It’s also important to keep in mind that every time crypto has suffered a decline, it has always bounced back to higher highs. As our resident crypto expert Sam Volkering notes, when bitcoin fell to $890, it bounced back to $2,700. And from $1,800 it bounced back to $4,900. So if history is anything to go by, the next bounce back could be even bigger.

If this week has taught us anything, it’s that the crypto market is still alive and kicking. And there’s certainly still profit to be made, if you know where to look.

This week in Money Morning

Have you given a bit of thought to stock prices recently…? You’d think with all the uncertainty going on with the trade war, stocks would be having a terrible time. Not the case. Stocks on the ASX continue to climb. The largest 200 shares are now up 13.3%. And as Harje wrote on Monday, there’s a hidden reason for it.

To read more, click here.

Let’s take a quick trip to China. Where the cities are crowded, the air is average at best and there are EV start-ups everywhere. As of March this year, there were 486 EV manufacturers in China. That number has more than tripled from two years ago. And guess who have been the stars of China’s recent stock market listings? That’s right, EV makers. So as Harje wrote on Tuesday, this is a market that is worth looking at.

To read the full story, click here.

You’ve probably come across a few richly valued Aussie tech stocks yourself recently. Afterpay, WiseTech, Altium. The usual suspects come to mind. But as Harje warned on Wednesday, investors have overly optimistic assumptions for earnings. And they’re forgetting about competition. So could we be in for a tech stock crash soon?

To find out, click here.

China wants a deal, Trump can smell it! It’s why they’re printing yuan in the billions and pushing it out into the system. The Chinese are creating liquidity. It’s a cash buffer for businesses hurt by tariffs. But Trump can keep this up for years potentially. And as Harje wrote on Thursday, it’s only a matter of time before a deal is struck…

To learn more, click here.

Maybe Trump is exactly the kind of guy the people of China need…a guy willing to stand up to China’s government…a guy willing to say things as they are. Especially when you consider that much of China’s manufacturing is a result of forced labour camps. So as Harje wrote on Friday, perhaps tariffs are the best thing for China’s economy overall.

To read the full story, click here.

Until next week,

Katie Johnson,
Editor, Money Weekend

PS: In this free report, discover how you can join the $100 billion-plus crypto inner circle today. Click here to find out how.

About Money Morning Editorial

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the…

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