The U.S-China trade war may have been devastating to both countries but for crypto, it has been a positive development. The influence of the war on crypto is far from over as crypto analysts Ben Swann and Rocky Miller of Bitsian say Chinese investors are moving a large chunk of their money from the Chinese Yuan to cryptocurrency especially Bitcoin in anticipation of the impact of the worsening war.
Fear of inflation and devaluation
The Chinese market is one of the largest in the world, but it is being threatened by the increasing pressure from the trade war with the U.S. Chinese residents, therefore, could face the danger of inflation of the Yuan and possible devaluation as has been the case with some countries. This has been stated as one of the reasons that so much money is coming into crypto from China and boosting Bitcoin’s price.
DailyFX’s senior currency strategist Christopher Vecchio in a recent interview with Kitco said the price of Bitcoin has been inversely proportional to the Chinese Yuan since the war started. Bitcoin value has been on the rise while Yuan has been going down as more money changes hands. This is said is because Bitcoin can be easily used to move money around the world but not the Yuan, at least not at this time.
“In an environment where the global financial system looks like it is potentially at risk because of the world’s two largest economies going at odds, people may be looking for alternative avenues to find ways to circumvent the capital controls being put in place to move their money around without the Chinese or U.S. government taking stock of it,” he said.
Vecchio also said the Bitcoin is not likely to hit the 2017 all-time high price of $20,000 unless the war escalates to unprecedented levels. According to him, this price will be attainable for Bitcoin only if the Chinese Yuan crashes to 7 CNY or less to a Dollar, which will be devastating to the economy, he added.
More money transfer services, weaker Yuan
Ben Swann also spoke about Facebook’s coming GlobalCoin, JPM Coin and Ultimate Secure Cash (USC). He said these are digital currencies but not cryptocurrencies and are basically just means of sending money across borders that are faster, cheaper and more efficient than existing infrastructure such as SWIFT.
As Chinese investors look for more ways to move their wealth around without being controlled by the U.S or even China, these are likely to be the next options which indeed will bring the CNY even lower down that Vecchio predicts, which means more money will flow into cryptocurrency unless the two countries end the war earlier.