The threat of a trade war between China and the U.S may have a real impact on the cryptocurrency markets. The cryptocurrency collapse extended since the start of the second quarter. Along with increasing regulations and bans from Google, the trade war threats have also been eroding crypto investor’s sentiment. Bitcoin plummeted below $7000 again following a brief rally at the beginning of the week, down 12% in the last seven days.
China has started to impose higher tariffs on U.S. products in response to Donald Trump’s aggressive trade strategies. The amendments in NAFTA agreement between the United States, Canada, and Mexico continues to weigh on investment markets.
U.S. stock markets have been under intense pressure since Donald Trump unveiled his strategy to impose higher Tariffs on Chinese products; Nasdaq and S&P 500, both fell almost 10% in the last month alone.
Trade War Wouldn’t Have Any Long-Term Impact on Cryptocurrencies
Like stocks and commodities, cryptocurrencies are highly speculative and risky assets, while investors always rush towards safe-haven assets such as gold and bonds during the period of high volatility. This is because market pundits are also blaming the trade war for the potential reason for the crypto market selloff.
“I think that there is a big connection in the way that people are managing their portfolios and the cryptocurrencies have been increasingly correlated with the stock markets especially in the last few weeks,” eToro analyst Mati Greenspan told CNBC. “This (comes) as more and more brokers add bitcoin, the liquidity bridges are being built.”
Charles Hayter, chief executive of CryptoCompare said, “The hint of a trade war puts a bit of fear into the mix and as we all now markets correlate in various periods depending on the exogenous factors.”
Although cryptocurrency markets wouldn’t experience any fundamental impact of the trade war, the correlation between stock markets and cryptocurrency exchanges seems to be hurting trader’s sentiments.
Bitcoin and other digital currencies are sliding purely on regulatory concerns and bans from Google. The market pundits are expecting further downside volatility in the short-term on regulatory matters, and they believe cryptocurrency market does have the potential to bounce back once regulators settle on rules and trading guidelines.
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