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Heavy losses were recorded in the US markets on Thursday after President Trump announced the introduction of new important tariffs on China in the coming weeks.
These tariffs will rise to about $ 50 billion a year for China’s exports. There is a widespread fear that China will respond and that the financial market around the world will be plunged into new turbulence.
The Dow Jones was down 724.42 points for the day, a decrease of 2.93%. The analyst expects that there will be further declines before the weekend. Some even say that this could be the beginning of a reversal of the multi-year uptrend that is responsible for the record highs of the past few months.
The question for many people is whether the fall of the Dow Jones presents a cryptocurrency opportunity.
Why is this trade war so important?
While President Trump has been threatening for some time the introduction of commercial tariffs, they have finally become a reality. It wants to create a more protectionist economy through which local businesses can reap the benefits of this policy change.
China is one of its main targets since taking office, as it accuses them of causing significant damage to US manufacturers and employment. There is no doubt that China will not take this decision lightly.
How could this trade war be good for cryptocurrencies?
While tariffs may seem like a good idea on paper since they should protect the economy, in reality they usually only benefit from a small segment of the economy. economy, and the rest suffers.
The US dollar will weaken as a result of this approach and it could pave the way for more institutions to make transactions using cryptocurrencies.
Rather than having to deal with a weaker US dollar, people can turn to the use of cryptocurrencies for their transactions and to store their wealth.
Bitcoin, for example, has been dubbed “digital gold” and it is at volatile times that investors place their money in more conservative investments like that of gold. Gold will generally retain its value as the financial markets worsen.
Cryptocurrencies can also be used to circumvent the trade restrictions that are in place. This means that significant fees and penalties can be avoided (although illegally) and that transactions can continue as usual.
If the use of cryptography becomes a common practice, many institutions will realize the many benefits associated with this approach and may not return to the fiduciary currencies when the volatility of these markets has stabilized .
An event such as this trade war could be the catalyst for a wider and widespread adoption of cryptocurrencies as a means of exchange.
How could this not work for cryptocurrencies?
In the world of finance, there is never a guarantee. There has been a massive bull market in the traditional financial word for many years now, with money for institutional investors to spend as they please.
Many had the capital available to invest in slightly riskier investments, such as cryptocurrency. However, if this trade war causes a sustained bear market, this could lead to a drying up of investments in the crypto sector, resulting in a bear market with the rest of the economy.
In a previous article, I myself hypothesized that when financial market fears increase, the price of bitcoin goes down and vice versa. Until now, I was right.
Whatever happens, it will be fascinating to see how crypto markets respond to the turbulence levels sustained in traditional financial markets as the United States and China face each other in a trade war.
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