US-China trade war effect on Bitcoin Price

There was a time when the breathing sapiens of the globe experienced a war on land. Who thought that the time would change enough that the countries will get into a “TRADE WAR” anytime. From the past few months, the big dominating currencies are getting into fights to make their national currencies strong among the Globe. USD is the highest traded currency over the past few decades and China is surely not in a mood of digesting it. 

The term “Trade War” is simply a different practicable way of giving limelight of ongoing “Currency Domination War” between the two nations.

Although, the news came between May 5, this year that Donald Trump, President of the US raised the tariffs on Chinese imports. This news doesn’t stand well for China’s business authorities and they stopped immediately trading with the US-based companies. This sudden, as well as an expected move, made Yuan a six months low in a few weeks.

The very first thing we need to realize that why Chinese and US trade tension is happening. 

The fundamental forces have started to collide with each other. To date, the United States has ruled over the entire world with its dollar imperialism. It has controlled the entire oil trade of the world as well as it has ensured that the dollar remains the global trade currency of this globe. Now, this gives the USD an exorbitant privilege.

Going through the facts, the impressive thing came into the picture is that 50% of all the dollar notes printed by the Federal Reserve is outside the US boundaries. It means that What is Paper for them becomes Money for Others. This becomes a source of extreme power. To China, this thing is giving them inferior status as far as the global economy is concerned; global trade is concerned. In terms of purchasing power parity, they’ve reached nearly to the equivalent status of the US but in terms of economic power, they’re yet to reach America equivalent status and the most reliable way of doing that is only if there Yuan is considered as the currency, as USD is across the world. 

How China can do that?

China has formulated a series of measures to reach that status.

They’ve done a currency swap agreement with the dozens of countries in Africa; in Latin America; in Asia and even in Europe. They are attempting to enable a remarkable variety of arrangements where people’s dependence on the US is replaced by their dependence on Yuan and particularly with Chinese trade. As a result, China is able to carve out a regional influence or a country to country-wise influence and reduced their dependence upon the USD. But in the case, if they have to create a global currency, then they have to challenge a dollar on a one to one basis and that is not accessible for them. So they have been doing a lot of other economic initiatives like Belt and Road Initiative (BRI). The Belt and Road Initiative is the revival of pre-existing ancient silk route with which they are building direct economic links, direct trade links, direct rail links, direct road links with Europe and some different parts within the Asian region.

In that sense, they are building their economic trade dominance. 

China has also accumulated nearly 100 tons of gold reserves to buffer against the blows of Trump’s trade war. To get back their national currency on the track, this judgment really provided them sufficient heat to melt down the tariff iceberg. The latest figures also show that the Gold bullion is approximately a six-year high.

As they are expanding economically in the trade term, America is seeing a serious threat to own status. 

In terms of manufacturing, America is a declining nation. In terms of demographics, they are also considered as a declining nation and in terms of superior position in Asia, they are also a declining nation. Though they’re declining, that does not mean that China is in a position to replace them. These two Everest sized powers, one declining and one in rising are clamoring for a status which is at present an open field.

The people from the countries of Europe, Japan, India, Brazil, Russia are in a huge mess on which road they have to take in terms of making a choice between USD and Yuan. They may dislike USD as an imperialist entity but they will never accept China taking the same position. It means this global collision of economic power or monetary power will never result in a smooth transition. The dollar will go down, it doesn’t mean Yuan will take that place. Now in that kind of situation, for a country like India, this will be a great challenge with whom to align, whether to align with USD or with Yuan. This problem will not be a problem for only one country, this problem is for a dozen countries. That question doesn’t have an easy answer.

In this kind of situation, nation-states are tormenting themselves with a literally impossible choice. If they stick with USD, they’re in a problem and the same goes for the Chinese Yuan. In this unmanageable circumstance, there is only one serious non-political choice they can co-relate to and that is Bitcoin and other cryptocurrencies. They have to give that decentralized and non-political currency a little space to sit in their trade car. If countries start moving just 10% of their foreign reserves from dollar to these cryptocurrencies, this will result in a huge and massive rise for the Bitcoin and other Crypto Assets. Now, the possible question is when it will happen. it totally depends on the type of economic curriculum the countries have right now.

This thing can probably take the front seat from October onwards and it will start gaining momentum and this momentum will go into 2020 and by the time we reach and cross Bitcoin halving in May 2020, the price of Bitcoin will keep on rising. Where it will stabilize, we don’t know. It may stabilize at $55,000, it may stabilize even beyond that, we don’t know. But, people are only going to see these two big powers colliding and no serious solution coming out of that and foreseen in that kind of eventual conflict.

Taking a note from the IMF and Bank of England proposed solution

IMF (International Monetary Fund) already suggested that there should be a different scenario and Bank of England has also come up with a proposition that we should go for a Dollar replacement in the form of a certain digital currency which is called a Synthetic Harmonised Currency. In this replacement, IMF and World Bank should maintain some sort of reserve assets and that digital currency should get its value, The most reliable trending case these days is the way Facebook Libra has got its value against reserve assets. Similarly, Synthetic Harmonised currency gets its value against SDRs (Special Drawing Rights).

(SDRs are termed as Special Drawing Rights maintained by different countries at IMF.)

Though there is a political proposal, America will never let that happen. Ultimately this problem becomes a problem of the political agreement. Finally, the cryptographic agreement will win so people will start moving from the lack of political agreement to the existence of the cryptographic agreement. The critical decisions between countries always lead to a rise in the Bitcoin prices as we saw in the Brexit and the Grexit too.

There is also a surge in 284% in bitcoin trades between the period of 19th May to 19 August this year compared to the period between 22 March to 22 June 2018, just prior to the Trade War.

The People’s Bank of China reportedly formed a non-government organization to the network which was inspired by Facebook’s recently launched a crypto project “Libra. Taking it in on positive note and with the billions of messenger users being introduced to Blockchain-based payment solutions, we can be sure that every major organization in this world will try to craft a response to this bizarre position. The crypto adoption will possibly decide the winner of these two rivalry nations and it will be a win-win situation for the Global Crypto Assets to boom. This vital public shift will definitely result in rising of Bitcoin and other Blockchain Assets.