Is the US-China trade war pushing bitcoin up and stocks down?

As the biggest trade war in modern history enters its second year, China and the US continue to battle it out, dragging each other into difficult and dangerous political and economic territory. This past two weeks saw some bloody days on both sides, with the Dow Jones Industrial Average falling almost 700 points in one day – its biggest one day loss since January.

China also had blood in the streets as the Yuan reaches a four-month low.

Paradoxically we saw bitcoin rally as much as 15% on the same day that the Dow fell, with the premier cryptocurrency having literally doubled in price so far this year to date from $4000 to $8000. Is bitcoin turning out to be the safe haven during this trade war between the two global powers as they fight it out for supremacy?

The US has been the leading economic power on the planet for the past several decades now, since World War 2, while China languished in the doldrums, but with the inevitable march of time and the sheer weight of population numbers, China has slowly been catching up, until it ranked a close second to the US, overtaking Japan as the number two economy on the planet. It hasn’t stopped there though. Once China was in motion, it has been impossible to stop their momentum as a sheer juggernaut of trade and investment over the years grew and sped up by the day.
Back in 2016 already, when then candidate Trump was on the campaign trail for presidency, he mentioned China by saying:

“We can’t continue to allow China to rape our country and that’s what they’re doing. It’s the greatest theft in the history of the world.”

Thereafter in April 2017 President Xi of China visited the newly elected President Trump to work out a deal to resolve their trade differences. However, that same discussion has turned into this current ongoing trade war two years later, with no end in sight. One recent added concern for the US is the fact that some of the products involved are new electronic goods which could be used for military as well as commercial uses, and now trade issues are becoming mixed up with national security and defense issues.

As politicians went back and forth between the US and China over the past two years, having meeting after meeting, trade tariffs began to build in a tit for tat retaliation between the two parties. Last year Trump even filed a case with the WTO against China for alleged unethical practices. And just recently China has done the same against the US. Both are accusing the other of unfair trade practice and neither are backing down. Under this kind of pressure, where 25% tariffs are slapped on the import of certain good by both sides, something has got to give. And now it has, as the stock market on both sides begins to take a beating.

And yet through all of this, in true “contrarian” form, bitcoin has actually been rising in what seems to be the start of its next massive bull run. As each side trades blows with the other, slugging it out for the title of world’s biggest economy, both are being weakened, allowing bitcoin to quietly carry on taking over the show as the biggest gainer by far of all the currencies, stocks or assets available today.

The US has so far applied $250 billion in trade tariffs exclusively to Chinese goods, and China is trying to match that with $110 billion in exclusive tariffs, and $60 billion more about to be added. Products affected range from foodstuffs to appliances to furniture and, most delicate of all, cellphones and laptops. In fact just hours ago President Trump just used his executive powers to declare a state of national emergency in the US due to perceived threats against national security and American technology in general from Chinese telecommunications company Huawei.

The move almost amounts to an outright ban on US companies selling or transferring technology to Huawei. A licence from the Bureau of Industry and Security (BIS) in the US has to be obtained now to deal with Huawei, making it much harder for the Chinese telecoms giant to operate, since they rely on US parts for their tech products. Trump and his advisers are pulling up the drawbridge on their perceived competitor, who is close to becoming their enemy.

With currency wars, trade wars and cyber wars between the two, it could be said that they are basically at war, just a colder version – for now. US Commerce Secretary Wilbur Ross made a statement saying the move against Huawei will
“prevent American technology from being used by foreign owned entities in ways that potentially undermine US national security or foreign policy interests...”

In reply to this Huawei said recently that

“restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers.”

The arrest of Huawei’s CFO in Canada in December was just one more move in this part of the trade war saga, where the US sees China as using its technology to spy on them, as well as stealing trade secrets and dealing with Iran in violation of sanctions.

This ongoing war of the superpowers could get still messier and spill over to affect the rest of the planet if it carries on in this way. Yet all the while bitcoin waits in the wings and does its own thing. Bitcoin is beyond borders and is not bound by any nation. It is a sovereign entity unto itself and those who wish to obtain their liberty are taking to it eagerly.

And this is happening now more than ever precisely because the trade war is having a knock-on effect on the stock market.

Not only the Dow, but also the S&P 500 and the Nasdaq both has 2.5 and 3.5% losses on a single day last week, their biggest this year amid escalating trade war tensions. And insiders are predicting more volatility in the near future, so the worst may be still to come as more tariff hikes are due. Both the Shanghai Composite and the Nikkei in Asia could suffer, while certain knock-on effects will be felt in Europe.

As a result of all of this, with no resolution in the all-out brawl between the big dogs, it seems that the little Doge, the other alts and particularly the once and future king Bitcoin will rise once again in the most epic bull run yet, outshining the old financial systems based on stocks and shares as well as national fiat currencies. As the Chinese I Ching might tell us, it favors the wise man to look to the coin as a safe haven and store of value in these unsettled and delicate times.

Everyone should have at least some exposure to crypto in their portfolios.

Bitcoin has not failed us yet and is moving as predicted, like clockwork toward its next ATH. And this boat is already sailing, so you might be lucky to still be able to grab your share and “hodl” as it carries you to the moon, while the rest fall like the setting sun into a deep and unfathomable sea of financial uncertainty.