CEO of ADVFN, Clem Chambers, thinks that devaluation of the Chinese yuan (CNY) due to a growing trade war between the United States and China is the real reason for the July 2018 Bitcoin rally.
The Bitcoin bear market has abruptly reversed into a rally during the latter half of July 2018, with Bitcoin’s price increasing from USD 6,100 to as high as USD 8,500. Many experts and speculators thought this rally was in anticipation of the approval of the first Bitcoin exchange traded fund (ETF) by the United States Securities and Exchange Commission (SEC). However, the SEC rejected the Winklevoss Bitcoin Trust ETF and thoroughly explained how they will not be approving any Bitcoin ETF anytime soon, yet the Bitcoin market barely reacted. As of this writing on 29 July 2018, after the ETF rejection news has had days to sink in, the price of Bitcoin is hovering above USD 8,200.
Chambers says Bitcoin is the new gold but far better. Like gold, Bitcoin can be used as a safe haven investment when fiat currencies are losing value. Unlike gold, Bitcoin can be purchased instantly, held on a computer, sent anywhere in the world instantly, and then converted back to fiat instantly. This whole process can be practically invisible with Bitcoin, whereas with physical gold the process is cumbersome and risky.
The Bitcoin rally occurred two days before a devaluation of the CNY, and Chambers believes this was insider trading. Even though CNY to Bitcoin trading is banned, it is still easy to do due to the decentralized and worldwide nature of Bitcoin.
The exchange rate of the CNY to USD has declined from 0.156 to 0.147 (7%) since June. This is due to the growing trade war between the United States and China which has seen hundreds of billions of dollars of tariffs issued. Devaluing the CNY is a mechanism by which the People’s Bank of China can gain an upper hand in the trade war, since it increases the trading surplus with the United States, increasing the impact of Chinese tariffs against the United States. Simultaneously, CNY devaluation is accomplished with massive amounts of money printing, which swells China’s treasury.
Chambers told Forbes that if the trade war goes into “meltdown” then Bitcoin’s price will “moon”. Based on this logic, Bitcoin investors should keep an eye on news about the trade war and the CNY/USD exchange rate, since it might have a bigger impact on Bitcoin’s price than anything else at this point.
Follow BitcoinNews.com on Twitter at https://twitter.com/bitcoinnewscom
Telegram Alerts from BitcoinNews.com at https://t.me/bconews
Image Courtesy: Pixabay