The trade war between the United States and China may eventually spread to the US bond market if China decides to sell off US treasury bills. And it can bring Bitcoin, ethereum, XRP and lightcoin to new highs, Forbes writes.
While the trade war between the United States and China is moving from tariffs to technology, Bitcoin is turning into new gold. From the beginning of the year, the digital currency added 132.69%. Altcoins followed suit.
Classic gold remains in the flat, and digital grows
Apparently, investors, worried about the destructive trade war, are seeking refuge in cryptocurrencies . How long will this rally last? It depends on whether the trade war spreads to the US bond market.
For many years, US treasury bonds have been a haven in times of uncertainty in the global market caused by trade wars and other geopolitical events.
The US bond market was also the “parking spot” of excess dollars of countries with a positive trade balance with the United States (for example, Saudi Arabia in the 1970s, Japan in the 1990s, and China in the last decade).
In fact, China has placed more than one trillion US Treasury bonds as part of its dollar management policy. But Beijing can start selling them if the trade war escalates.
“Bitcoin as a store of value can benefit from the sale of US Treasury bonds,” said Ruggiero Gramatika, founder and CEO of Yewno, an analytical company.
“After the sale of US bonds, the money will flow into other treasury bonds. The two main competitors of the US Treasury are German and Japanese government bonds. However, they have lower yields than US bonds. ”
There is gold:
"Gold is an alternative, but with much lower profitability, liquidity and high transportation costs ," continues Gramatika.
And there is Bitcoin:
"Bitcoin and other cryptocurrencies may be the best savings because of their limited supply, predictable inflation and ease of translation."
Nevertheless, Grammar concludes, the probability of this step is very low, since it can become self-destructive for China. This will devalue the US dollar against the yuan, make Chinese exports more expensive, and China will have worse alternatives to keep money.
Publication date 05/31/2019
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