Bitcoin’s safe haven capital inflows may be reversing due to tariffs delays


The Dow Jones and S&P 500 stock indexes are up, and, coincidentally, Bitcoin is down over the past five days after assaulting $12,000 on several occasions. BTC has succumbed to selling pressure, presumably to fund the rise in equities across the financial street. It had held $11,400 for a space of time, but it now has dipped down to $10,863, per Bitstamp. Hourly charts reflect a Bitcoin battle where bears are suddenly taking charge, while even a daily chart reports a modified “Bear Cross”, where the 10-Day moving average has eclipsed the 5-Day MA.

Why the sudden shift in market activity? In a surprise move, the Trump administration suddenly backed away from tariffs on China’s electronic goods, at least until after the 15th of December. Equity markets were ecstatic, but political pundits are scratching their collective heads. Trump likes to claim that China is paying his tariffs, not consumers and small businesses. A recent Harvard study verified this fact. If Trump fears political backlash from raising consumer iPhone and other electronic prices during the last quarter of the year, pundits are saying that he is trying to have it both ways.

The U.S. Trade Representative’s office released this statement:

Certain products are being removed from the tariff list based on health, safety, national security, and other factors and will not face additional tariffs of 10 percent.

The “health and safety” of Trump’s presidential campaign in 2020 is most likely. Trump had recently tweeted that he would implement a new round of 10 percent tariffs on $300 billion worth of Chinese imports as of the 1st of September. At that time, equity markets went into what has been termed a “vicious sell-off”, while Bitcoin suddenly went into a higher-geared rally.

The reasons for the recent Bitcoin rally did not escape the majority of the analyst community. They had been watching closely the inverse correlation between stocks and currencies, for that matter, and Bitcoin. The crypto industry consensus was that institutional investors had finally wised up to the notion that the world’s favorite digital asset was a perfect “safe haven”, better than Gold and other precious metals in that it also offered a hefty potential for appreciation during a temporary holding period.

The most quoted analyst of late, regarding the “Bitcoin as digital Gold” phenomenon, has been Nigel Green, chief executive of the financial consultancy firm deVere Group:

Bitcoin is becoming a flight-to-safety asset during times of market uncertainty. Bitcoin is currently realising its reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe-haven asset, but bitcoin – which shares its key characteristics of being a store of value and scarcity – could potentially dethrone gold in the future as the world becomes increasingly digitalised.

Green has since expanded upon this theme by adding:

The legitimate risks posed by the continuing trade dispute, China’s currency devaluation and other geopolitical issues, such as Brexit and its far-reaching associated challenges, will lead an increasing number of institutional and retail investors to diversify their portfolios and hedge against those risks by investing in crypto assets.

As we have reported in the past, having “safe haven” status, however, can be both good, as well as bad, a double-edged sword, so to speak. Capital inflows can bring about a nice rally on occasion, but the capital for all intents and purposes is in a temporary holding pattern. When risk appetites reverse, as they have with the sudden tariff lifting by Trump, the outflow of capital can be just as swift. Bitcoin has now returned to where it was back on the 4th of August. Hopefully, it has found support once more.

Read Also: