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Will the price of Bitcoin fall again due to the US trade war? and China?

May 19, 2020

The U.S.-China trade war started in January 2018 when import duties were applied to products from China. In July of the same year, the price of Bitcoin (BTC) It fell 31% from $ 8,487 to $ 6,000.

Now the US and China You are about to start a new trade war while the two nations fight for the origin of the corona virus. President Donald Trump recently announced this The trade agreement signed in the first phase “does not seem to be the same”.and expressed her intention to get away from him.

The price of BTC, CoinMarketCap’s main digital asset, is subject to a significant drop if it recurs a large-scale trade war between the two world powers due to the declining institutional appetite and the large Chinese market share in the tether market (USDT).

China accounts for a fairly large share of the Bitcoin market

Will the price of Bitcoin fall again due to the US trade war? and China?
Will the price of Bitcoin fall again due to the US trade war? and China?

According to a Diar report in mid-2019 Cable demand in China exceeded $ 10 billion As early as June 2019, 62% of all tethered streams accounted for the second quarter of last year.

Diar said:

The data provided to Diar by blockchain analysis company “Chainalysis” shows the extent of Tether’s demand in China of more than $ 16 billion that the exchanges received in this market in 2018. This year, it’s already exceeded $ 10 billion and paved the way for the biggest year yet. Flows from 2019 to date on exchanges primarily dealing with Chinese traders exceeded $ 7 billion of the total value of the 2017 transactions.

China's share of the tether market

Tether market share in China. Source: Diar

In addition to the high usage of tether, two cryptocurrency exchanges are reported in China They received government approval to serve institutional investors.

The Matthew Graham, CEO of Sino Global Capital, wrote::

It seems more and more that this is the case with China one) Huobi and OKEx received some approval (institutionalization) 2) Binance and especially international stock exchanges froze 3) Illegal bucket shop exchanges such as MXC and Biki have closed or are being prosecuted abroad.

Despite the strict ban on cryptocurrency trading Chinese investors make up a fairly large chunk of the global Bitcoin market.

If the flow of capital to China decreases due to the increasing pressure from the United States, likely to decrease appetite for high-risk assets, including individual stocks and Bitcoin.

Historical data also indicate that geopolitical risks have previously increased led to a sharp drop in Bitcoin prices.

For example, Bitcoin prices dropped from around $ 8,000 to $ 6,000 in July 2018, two weeks after the United States applied import tariffs on $ 34 billion of Chinese products.

Bitcoin price chart when tariffs were introduced in 2018

Bitcoin price chart using the tariffs in 2018 Tradingview

Institutional demand could decline

A possible case of the existing trade agreement between the United States. and China This could also lead to a rejection by the US stock market.

China is struggling to meet the purchase requirements set in the first phase of the agreement. However, some of them are expected to be disregarded.

An exchange correction by the unexpected restart of a US-China trade warIf a point is reached where small and medium-sized companies are still facing a bankruptcy cascade, this could put a strain on institutional investors and cause the demand for Bitcoin to decrease in parallel.