With Bitcoin continuing to trade upwards it’s very important that, as an investor, you exercise focus.
You will be tempted into making snap judgements.
Situations will arise that may force you to relinquish your Bitcoin position.
But we urge that you stay put.
We strongly suggest that you build a bitcoin bunker around yourself, insulating you from hype and distraction.
Ultimately – there should be no bitcoin sells in your trading history until the price has blown past six figures per coin.
Bitcoin’s value expansion is the result of a major macro trend.
You see, the world’s financial markets are connected in such a way that has led to cross asset volatility.
As value is pulled from one asset class, it must then be stowed away in another.
But what happens when value is being pulled from multiple asset classes?
What we’re seeing unfold in the bitcoin market is the result of an intense trade war between the world’s largest economies.
Traditionally, Gold and/or other precious metals will have provided sanctum for investors – instead, global investors are now selecting bitcoin as the most ideal haven asset and this is being reflected in the price.
Indicators are pointing to a long and extended bull-run which has many negative connotations for the world economy since this will be a bullish move fuelled by money pulled from other asset classes.
For crypto investors profits will be thick – but, this may come at the expense of economic stability.
In short, as the global economic situation worsens – bitcoin will continue to lift higher.
The Tale of the Tariff
For the last year the USA has been placing tariffs on imported industrial goods.
The aim here is to boost domestic production.
However China, and other nations, have responded – placing their own tariffs on US imports of industrial and consumer products.
All of this is having adverse effects on global equities and commodity futures.
Effects are also being seen in the Bond markets as yields have started to fall.
Now this isn’t the first time that the United States have been involved in a trade war of this nature.
In fact – in 1930 during the Great Depression U.S. President Herbert Hoover imposed tariffs on all foreign imports of agricultural and industrial goods which led to retaliation from Canada, Britain, France and other nations.
As a result of this, the country was forced deeper into depression as exports grinded to a halt which ultimately caused farmers, industrialists and workers to suffer.
There are certain industries which cannot now successfully compete with foreign producers because of lower foreign wages and a lower cost of living abroad, and we pledge the next Republican Congress to an examination and where necessary a revision of these schedules to the end that the American labor in these industries may again command the home marketU.S. President Herbert Hoover, June 1930
Failing to learn from this – in 2002, U.S. President George Bush enacted tariffs on foreign steel imports from Brazil, China, Japan and other nations.
The goal was to protect the U.S. steel industry from foreign dumping.
Today I am announcing my decision to impose temporary safeguards to help give America’s steel industry and its workers the chance to adapt to the large influx of foreign steel. This relief will help steel workers, communities that depend on steel, and the steel industry adjust without harming our economy.U.S. President George Bush, 2002
However, tariffs not only led to domestic pressure characterized by supply shortages and higher prices, but also international pressure.
By December of 2003 more than 200,000 workers in U.S. manufacturing lost their jobs as a result of the tariffs.
Overall, tariffs on foreign imports always create distortions that lead to economic fallout.
Typically tariffs are designed with the specific purpose of transferring wealth from consumers to producers.
For example let’s say a 30% tariff was placed on foreign microchips.
Domestic producers of microchips will be much better off since imported chips are now 30% more expensive.
Because of this they are now able to sell more chips and at higher prices due to lack of foreign competition.
However – this causes distortion in the market since consumers of microchips such as electronic hardware producers are now forced to pay these higher prices.
This in turn leads to slowed production of consumer goods and therefore higher retail prices which leads to reduced sales which subsequently reduces revenue and creates an environment that fosters higher levels of unemployment.
With the economy being so intertwined in this fashion this is the reason you’d begin to see falling prices throughout the financial markets.
Due to the hypothetical 30% tariff on microchip imports, stock prices of the companies that rely on cheap imports begin to slide downward.
Stock prices of the companies that sell the products produced by microchip consumers begin to slide downward.
These side effects are then maximised and compounded upon as investors begin to pull their money out of these falling stocks.
Bitcoin is benefiting due to the effects of tariffs that have been enacted by U.S. president Donald Trump.
The Trump administration has placed tariffs on over 1,300 categories of Chinese imports including Solar Panels, medical devices, batteries and others.
China has responded with tariffs of its own.
In retaliation, targeting U.S. agriculture and industry, China has placed tariffs on U.S. chemicals, soybeans and a list of more than 500 other products.
The results of this can be seen across the world’s financial markets.
Soybean futures have fallen to 10 year lows.
The Golden Basket
As the world’s financial markets continue to bulk under the pressure of Trump’s tariffs more negative effects will reverberate across industries and markets.
The effects will be drastic and are unavoidable so long as this global trade war continues to expand.
This is good news for Bitcoin and crypto currencies in general.
As always, I’d like to draw your attention to the Golden Basket.
Indicators are pointing to this trend continuing throughout 2019 and into 2020.
Overall this is a macro event that has the potential to produce excessive returns which will be fuelled by capital that is currently being pulled from other asset classes. As the trade war intensifies due to the increase of retaliatory tariffs, we can expect to see much more of a push upwards.