The trade war between China and U.S. has sent ripples of uncertainty in the global finance sector. Chances of recession loom around as the fear across the investor community is growing. When it becomes difficult for businesses to survive due to the policies at the governmental level, investors usually take their money out of the market, showing risk-averse attitude by choosing a less risky option of an investment than the risky and uncertain ones.
But amid this unpredictability of the financial market and looming chances of recession, investors also try to save their capital by investing in store-of-value assets such as gold. Since gold is the universal standard for representing value since ancient times, it is trusted as a store of value even now. If the trade war worsens, the flight to gold is expected to happen as seen in the past few months.
Over the past decade, another store of value asset bitcoin, has gained prominence due to its technological edge. Bitcoin came to the global scene as a peer-to-peer digital monetary system because it gave everyone an opportunity to participate and maintain the network by acting as a node. Unlike banks, people themselves come in power in the network.
Due to bitcoin price volatility, the major portion of attention is given to the crypto owing to its ability to act as a store of value since it is also largely poised against the traditional banking system of the world. As opposed to the centralized system of banking, bitcoin works on a decentralized network and is free of the problem of inflation due to a fixed total supply of 21 million.
While talking to BlockPublisher, James Coughlan, Bitstocks Relationship Manager recently opined about bitcoin’s price getting affected by the US-China trade war stating:
Bitcoin and other Crypto-backed digital assets would benefit from a trade war as economies on both sides of the war will get very volatile. Until some resolution is reached, we can assume that people will look for alternatives investments, especially those which are not directly tied traditional markets.
Instabilities in the global financial system tend to move people towards the alternatives. With gold being the primary, bitcoin has also stepped into the league of store-of-value assets, owing to the developments that it had made lately.
These developments have come in the form of a very strong rapport among people. Since Facebook stepped in the crypto world with its own crypto Libra, a testament has been given to the power carried by cryptocurrencies. With regulatory bodies also looking at bitcoin and the broader crypto world now, positive sentiment is building up about bitcoin.
Bitcoin is often termed as the “digital gold“. But with businesses getting affected as a result of the ongoing trade war between two of the world’s biggest economy, how is bitcoin’s price expected to alter?
The price of bitcoin is purely based on speculation. If there is a positive hype around the asset and its demand grows, its price shoots up. The trade war increases demand for assets such as gold and bitcoin, thus taking their prices up. Although gold has been significantly affected by trade war in terms of its price, bitcoin has not shown very strong upward momentum. Still, it has risen from its lower 4000s of early-April, to the current levels of around $10,330.
The world falling into uncertainty, even the European Central Bank is adopting a defensive approach by cutting down interests rate to allow people to borrow and spend more. With fear of eminent recession, bitcoin has a golden chance to gain new adoption as inherent flaws in the banking getting exposed will develop a relatively positive comparable image of bitcoin.