Trump Wants to Print More Fiat: Underlines Bitcoin’s “Safe Haven” Status
In the years ahead, bitcoin (BTC) may have the high ground as a uniquely uncorrelated safe haven asset if trade and currency tensions continue flaming up on the world stage.
The latest development boding that possibility came on July 3rd, when U.S. President Donald Trump asserted via tweet that the European Union and China’s government were “playing [a] big currency manipulation game.
The president went on to argue more U.S. dollars should be printed to “MATCH” those entities’ currency.
The remarks come after President Trump has recently been lobbying the Federal Reserve, America’s central banking system, to raise keep interest rates low while simultaneously undertaking quantitative easing (QE) — the act of printing money so it can be injected into an economy, e.g. to purchase government debt.
China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!
— Donald J. Trump (@realDonaldTrump) July 3, 2019
That tandem of low rates and QE is what Trump has cast as China’s main resources in its bid to overtake America’s economic dominance. To date, Fed chairman Jerome Powell, who operates independently of the president’s authority, has resisted giving in to that strategy.
Yet the fact that President Trump has continued to publicly call for competitively devaluing the dollar shows how currency war anxieties are currently running high on the international stage, and they may go higher yet. That dynamic could play right into bitcoin’s hands … or rather, its market cap.
Dollar Down, Bitcoin Up?
The dollar’s hegemony in the world economy looks like it could be in trouble, and President Trump spooking investors through badgering the Fed might just be one small example why. However, larger international factors obviously figure into the equation.
Zooming out, the bite of U.S. sanctions and growing trade wars have the E.U., China, Cuba, and Russia all respectively eyeing ways to sidestep Washington and its greenbacks. Cuba and Russia having specifically explored cryptocurrency tech as part of those efforts, for example.
Of course, the USD won’t be knocked down overnight. But the needed conditions for a decline are already being set as major powers are looking to further de-dollarize.
That reality isn’t in the U.S. government’s rational interests, but it could entail a series of circumstances that would make bitcoin even more of a safe haven asset than it is today.
If the dollar’s unipolar dominance gives way to a more multi-polar field, currencies like the Chinese yuan and the E.U.’s euro may see their profiles rise considerably. Yet if consensus isn’t reached and a new hierarchy of currencies emerge, then bitcoin — which is deflationary and non-sovereign and thus not prone to planners’ competitive devaluations — will have a major opening to become a currency of choice in the world.
Bitcoin as King of the Hill
Former Fed chairman Ben Bernanke has previously noted that one of the dollar’s biggest advantages is its “stability of value.” As such, long-term instability around the dollar could lend to bitcoin’s stability in kind if BTC becomes a bigger safe haven asset.
Yet bitcoin, still fledgling and small compared to large forex markets, seems to already be enjoying the entrenchment of its position as an economic safe haven.
This spring, markets research firm Delphi Digital published a report exploring how bitcoin has recently been outperforming other mainstream assets traditionally regarded as safe havens for investors, e.g. U.S. Treasuries, gold, and the Japanese yen.
The firm explained:
“Contrary to its recent history, Bitcoin has remained largely unaffected by the sell-off in risk assets, though expectations for market volatility are trending higher. It is still too early to claim victory yet, but BTC’s uncorrelated nature has so far proved true.”
The future is ever inscrutable, indeed, but it seems a window is lining up through which bitcoin might be pulled further shoulder to shoulder with some of the world’s biggest assets.
In that context, President Trump’s recent inflationary efforts may end up helping bitcoin more than they help the dollar.
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William M. Peaster, Khareem Sudlow