Another week, another round of crazy developments in the macroeconomy. Donald Trump looked to impose fresh tariffs on China and the Federal Reserve hinted at more dovishness. Analysts across the board say that these stories will drive demand for scarce assets, namely gold and Bitcoin, in the coming months and years.
Fresh Tariffs to Be Slapped on China
Once again, President Trump is upping the economic pressure on China. On Friday morning, the American leader unleashed his latest volley in the ongoing trade spat between the two economic powers. In a series of some six tweets, he lambasted China’s tactics, writing:
“For many years China (and many other countries) has been taking advantage of the United States on Trade, Intellectual Property Theft, and much more. Our Country has been losing HUNDREDS OF BILLIONS OF DOLLARS a year to China, with no end in sight.”
To “balance” out this “very unfair” equation, Trump went on to propose fresh tariffs on $550 billion worth of Chinese goods. He is currently looking to tax this sum of Chinese goods at a rate 5% higher than it is now, which will result in tax inflows of billions for the American economy.
Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far….
— Donald J. Trump (@realDonaldTrump) August 23, 2019
In his tweets, the President also touched on China’s fentanyl economy and even stated that Chairman Xi of China could be seen as an “enemy” — all inflammatory comments that may only perpetuate what some have called a new “cold war”.
According to Hans, an Ikigai Capital Management quantitative researcher, this new phase of the trade war will only be good for Bitcoin. In a thread posted to Twitter, the cryptocurrency fund analyst argued that to counteract the negative economic effect of these tariffs, the People’s Bank of China must devalue its currency.
Hans claims that “this inflation pushes up the price of ALL assets, but especially those that are scarce, such as commodities, like Gold and Bitcoin.”
Indeed, over the past few months, we’ve seen a negative correlation develop between CNY/USD and the price of Bitcoin, implying that further negative supply shocks to China’s fiat economy may only boost BTC.
September Rate Cut to Be BTC Boon
At the same time, some have begun to expect the Federal Reserve to cut interest rates to try and catch up to the near-zero or negative rates currently being imposed by the world’s central banks. While Jerome Powell, the chairman of the Fed, has claimed that he will not cut as much as the White House wants — 0.75% to 1.00% — he did note that he is willing to keep the economy strong.
OKEX, the cryptocurrency exchange, recently came out with a blog claiming that should interest rate cuts take place for the rest of this year, Bitcoin could boom. The platform’s analysts wrote:
BTC gained about 12% against USD in between FOMC June and July meetings. Assume that a 25 bps cut could give about 12% gain to BTCUSD, three more 25bps cuts could send BTCUSD to $14,000 levels by the year-end, breaking the previous high near $13,800.
This analysis comes shortly after a leading financial journalist suggested that central banks are literally digging their own grave by printing money, which in turns increases the price of Bitcoin. Shew rote that dovish monetary policies, “which amount to competitive currency devaluations in the name of reflating economies”, are driving up the price of Bitcoin.\
According to Thomas Lee of Fundstrat Global Advisors, these macroeconomic developments will do much more than bring Bitcoin to $14,000 in the coming weeks. As reported by Blockonomi previously, the staunch Bitcoin bull, known for his lofty price predictions, earlier this month suggested that BTC could hit $20,000 by year end with these macroeconomic factors in tow.