The Chinese yuan just faced a major selloff as the U.S.-Chinese trade war is worsening. President Trump has blasted his Chinese counterparts anew over “currency manipulation.” Accordingly, U.S. stocks have taken a blow because economic nervousness is rising.
Yet mainstream nervousness seems to have translated to cryptoeconomy confidence, at least acutely, as the bitcoin price spiked around $1,000 USD on August 5th with tensions flaring on the world stage.
Whether bitcoin is coming into its own as a true safe haven asset remains to be seen, but the possibility becomes a burning point of discussion whenever BTC fares well while high-profile mainstream assets drop.
Bitcoin Is Up, Global Drama Is Too
On Monday, the Chinese yuan sunk to its lowest valuation in more than decade, with seven yuan being needed to fetch one dollar.
Echoing analysts across the world, investment bank UBS published an August 5th noting the sinking yuan price was the Chinese government’s latest de facto blow against the U.S. in an unfurling trade war, being an attempt to make China’s exports cheaper and more attractive.
“Markets are likely to take today’s yuan trade as a signal from China that currency depreciation is on the table if push comes to shove with US tariffs,” the bank said.
As for President Trump, there’s no question he took the latest yuan depreciation as a shove. The president has recently been calling for the U.S. Federal Reserve to print more dollars to keep up with China’s “big currency manipulation game,” and he called out that “game” again on Monday as a “major violation.”
China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
In this light, it would seem that tensions in the U.S.-Chinese trade war may only be beginning to heat up. Markets have responded rapidly in kind. For example, U.S. stocks faced sharp selloffs after the yuan news started to spread.
BREAKING: Stocks plunge around the world as US-China trade war worsens, threatening global economy; Dow sinks 800 points, or 3%. https://t.co/iqcZjWF99o
— The Associated Press (@AP) August 5, 2019
Investors are responding to concerns that the world is on the verge of a global recession that could prove worse than the last. It’s why safe haven assets were up on the day, and bitcoin notably joined their company.
Bitcoin In Safe Company?
At press time, the bitcoin price was hovering around $11,800, having experienced a seven percent rise yesterday and hitting $12,200 today. This is after the cryptocurrency had traded below $10,000 within the last week.
The performance has pundits once again considering whether BTC is becoming a safe haven asset. On August 5th, more entrenched haven currencies like the Swiss franc and the Japanese yen also strengthened for comparison.
The comparison is interesting, since bitcoin is typically seen as uncorrelated with mainstream assets. Weeks ago, market research firm Delphi Digital released an analysis detailing how BTC had been acutely outperforming other safe havens like gold and U.S. Treasuries.
“It is still too early to claim victory yet, but BTC’s uncorrelated nature has so far proved true,” the firm noted.
Speculators Just Speculating?
Not everyone was buying the positive early August blip in bitcoin markets as a sign BTC was becoming a safe haven for investors.
For example, bitcoin skeptic Peter Schiff attributed the buy pressure to speculators “betting that the Chinese will buy” bitcoin rather than Chinese investors actually buying bitcoin themselves.
CNBC is trying its best to dupe its audience into buying Bitcoin. Despite gold being a much larger market, CNBC devotes far more airtime to Bitcoin. The Chinese aren't buying Bitcoin as a safe haven. Speculators are buying, betting that the Chinese will buy it as a safe haven!
— Peter Schiff (@PeterSchiff) August 5, 2019
What will be key to watch, then, will be if bitcoin continues to do well as market chop from the U.S.-China trade war intensifies. If the cryptocurrency does gain ground, its case for being a safe haven asset will grow too.
Such a possibility is why U.S. Secretary of the Treasury Steven Mnuchin was recently criticized for saying that in a decade’s time “I will personally not be loaded up on bitcoin.” If bitcoin does end up becoming a safe haven asset, then Sec. Mnuchin may later walk back that claim.