It is no secret that cryptocurrency prices can be volatile. Those of us who have taken the step to sign up with the likes of Luno to acquire a bitcoin wallet and get in on the action have seen prices soar and then come back down to earth just as quick.
The reasons for these rapid increase in Bitcoin’s value have not truly been identified and did catch some investors off guard.
This puts into question what can actually change the market value of cryptocurrency.
There is an argument that trade wars can go some way to affecting the prices we pay for our crypto, but is this true?
The Old Safe Havens
When trade wars occur, there is a need to protect money. There is a strong possibility that crypto is becoming a safe haven in these situations and helping citizens to stay safe during these trade wars. As a result, crypto prices can increase.
Before crypto, the same safe havens existed but investors would turn to US Treasuries and gold to stay protected.
However, gold now has significant carry costs and the dollar has gone from strength to strength, meaning it is not the safe haven it once was.
US Treasuries are still classed as somewhat of a safe haven. However, they may be at real risk if China sell them off.
At current, China obtains more than a trillion dollars of US Treasuries. The current China-US war on trade could see them cash them in and crash the market.
Crypto Is the New Answer
Due to a lack of options for investors, there is a strong argument that crypto has become a new safe haven. It could be a better option in current times over opting for US Treasuries or gold.
However, crypto does not arrive without its own risks and people should be aware of what they are doing when dealing with crypto.
Nevertheless, many experts believe that the most renowned and well-known digital currencies have been boosted by trade wars.
Simultaneously magnifying uncertainties and global risks. Many venture capital partners and industry experts believe that the likes of Bitcoin have already overtaken gold as the new safe haven during trade wars.
While the US and China wage war and Europe undergoes a banking crisis with Brexit in the background and more uncertainty towards trade deals there, crypto can be dubbed the digital gold and a new safe haven.
Or, Maybe Not
Not all experts agree on this though. Some believe Bitcoin and other cryptos cannot take the place of a safe haven.
They argue that on one hand gold is a universally approved asset that has been in circulation for over 5,000 years. They continue to argue that gold, unlike Bitcoin, does not require the internet for a change of ownership.
Yet, there is also the possibility that both gold and crypto can benefit from trade wars – and become more valuable from them.