A leading Australian blockchain pioneer outlined a convincing theory as to why the price of Bitcoin exploded this week.
The dramatic escalation of the trade war between the United States and China has caused the recent peak in Bitcoin prices when Chinese wealth has poured into BTC as a "safe haven," says DigitalX CEO Leigh Travers.
Bitcoin has increased by over 40% since President Donald Trump stepped up the US-China trade war early last week.
Rates of 25% on $ 200 billion Chinese goods went into effect on Friday morning in the United States. Over the next two days, the Bitcoin price rose by almost 20%.
Chinese investors drive the price of Bitcoin
Travers, who runs DigitalX – the first company in the world with listed blockchain technology – said micky Tuesday believes that the peak in Bitcoin prices is driven largely by Chinese investors.
"Chinese Chinese and expatriates around the world are contributing to the recent increase in the price of Bitcoin. They are seeing Bitcoin as a cover against the falling Yuan," he explains.
The yuan fell to four-month lows against the US dollar during the last round of the US-China trade war.
Trade war will hurt China more
Societe Generale expects the last round of tariffs could lower China's GDP by 0.5% and that of the United States by 0.25%. But it is China that seems to have more to lose from the stoush, as it exports much more to the United States than vice versa.
With the cryptocurrency trade officially banned in China, most fiat trading is conducted in Over The Counter (OTC) transactions making it virtually impossible to put figures on the amount of Chinese money flowing into.
However, Travers – who is also Vice President of the Australian Digital Commerce Association – says that c & # 39; is a precedent.
"China has been one of the biggest Bitcoin sales leader of this magnitude on almost every other occasion in the past, except for Consensus 2017," he says.
Travers adds that some other traditional ways that allow investors to get money from China, such as foreign real estate investments, have been "significantly closed".
Bitcoin differs markedly from the Chinese currency
The head of international fixed income to National Alliance securities Andy Brenner made a similar point in a note to clients this week, pointing out that Bitcoin had made a recent and sharp divergence from Chinese currency prices.
"If I were in China and wanted to diversify, it would seem logical that Bitcoin is a short-term alternative," Brenner wrote.
"While we do not see the direct flows of those who are buying Bitcoins, we can see that the offer for Bitcoins in this last race has coincided with a large check mark in the value of the Chinese Yuan against the dollar".
Other factors in peak prices
Other factors in the recent Bitcoin spike include $ 1 million of Bitfinex IEOs (BTC rose 4% in the news), the Consensus conference in New York and institutions of bullish signals are investing in crypto, including Fidelity which will open soon the Bitcoin OTC counter.
But numerous other analysts agree that the flight to security during the trade war was a factor in the price boom.
"Bitcoin is often referred to as the digital gold and we are currently seeing digital currency playing the same role in the physical gold market amid an investor escape to security," says Travers.
Surprisingly, the gold itself rose only modestly around 1% and remains well below its high annual ratios.
"The non-response of the price of gold sends a warning signal to traders that its safe haven status may be in decline and that further falls could be in perspective," Martin Essex wrote in DailyFX.
Bitcoin volatility is a problem
However, Bitcoin remains an unlikely "safe haven" given its volatility. The cryptocurrency closed 2018 with a 73% drop.
For this reason, Travers says that Bitcoin will only form a small part of a portfolio at this stage.
"It's a way for someone to diversify their wealth," he says. "It's not a short-term bet, it's a long-term investment and a very small part of a portfolio.
"But it doesn't take too long to take a position of 1% for the 21 million (total supply of BTC) to disappear quickly enough."
Travers says he believes in the millennium and some technological investors already prefer Bitcoin to Gold as a repository of wealth.
Asked whether he believes Bitcoin will surpass gold, he says that cryptocurrency has "a long way to go".
"If they were at par, Bitcoin would be $ 400,000. I think (it will happen) over the course of my life.
"This is my personal opinion," he says. Travers laughs and adds: "Certainly not a recommendation to buy or sell!"
To update: further circumstantial evidence from Alex Saunders.
The best thing about the recent one #crypto the pumps are happening in the waking hours of the Australia Pacific. This occurred during most of 2017 before the United States / Europe took over during the ICO parabolic end of 2017. #trading
– Alex Saunders (@AlexSaundersAU) 15 May 2019