Trading Blog | 5 min read
Trump’s Trade War May Be Driving Chinese Investors to Bitcoin
As the Chinese Yuan (CNY) falls in value due to factors like the ongoing trade war with the US, there are signs that locals are increasingly moving funds into bitcoin.
Investors have been pilling money into Bitcoin since the start of the US-China trade war
- Many investors have bought gold, a conventional haven asset, as the US-China trade war continues to weigh on global growth and market sentiment.
- People also ploughed money into bitcoin during key moments in the trade war, according to eToro data.
- Trading of bitcoin surged 140% during these key moments.
- However, the cryptocurrency remains much more volatile than gold.
Investors appear to be treating Bitcoin as a haven asset similar to gold, given the volume of cryptocurrency trading has increased during the conflict.
There was a 284% surge in bitcoin trades between 19 May 2019 and 19 August 2019, compared to the period between 22 March and 22 June 2018 just after the trade war, according to data from eToro, an online trading platform.
Gold — a popular asset to hold during times of uncertainty — rose by a less dramatic 73% over the same period.
Trading of Bitcoin more than doubled during certain key moments of the trade war, the data showed —usually after tensions calmed.
US-China Trade War and Its Effect on Cryptocurrencies
According to a Bloomberg analysis of prices over 30 days, the negative correlation between the yuan and bitcoin has fallen to a record low in the last seven days.
While previously the Chinese government has sought to keep the value of its national currency above 7 CNY to the dollar, last month the yuan was allowed to slide below that level, dropping to its lowest for 10 years. The move was reportedly in response to U.S. President Donald Trumps threats in early August to impose a 10 percent tariff on Chinese imports.
That the drop in yuan value is causing a flight by Chinese investors is backed up by exchange data. Bloomberg spoke to Dr. Garrick Hileman, research director at Blockchain and CoinDesk contributor, who said that bitcoin prices on exchanges such as Huobi that cater more to Chinese traders are trading at a premium.
The inverse correlation between bitcoin and the yuan also notched up in April and May “as the tensions ratcheted up with the deterioration on U.S.-China trade relations,” Hileman said.
The report comes as new details emerge on China’s own national digital currency. The recently appointed chief of the digital currency division of the People’s Bank of China has said the upcoming digital yuan will have features not offered by Facebook Libra.
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