Global stocks fall as china devalues the Currency. Today the global stocks suffered losses as China decided to devalue its currency by 12 percent to absorb the cost of the US tariffs. following this decision, a sharp drop was observed in the stock market.
Effect of the devaluation on the Us market.
The Us market experienced the biggest sell-off in for this year today. All 30 Dow stocks Trades closed with their all-time low with Nasdaq and others being the top losers.
Apple also joined the big losers and it is speculated that the price will go down a little bit more. What happens next is unclear.
What is certain is that traders on wall street are intrigued by the events of today.
Effect of the devaluation on Cryptocurrency
China markets down 0.5%, Hong Kong down 1.5%, Dow futures down 125 points. Bitcoin up 5%. We are entering a new cycle where Investors are moving into Bitcoin when equity markets fall.”
Bitcoin is rising as the Dow drops and the Chinese Yuan tumbles to its weakest level in ten years, triggering a renewed debate on whether BTC has emerged as a new hedge against global economic instability.
“If you are looking for narrative on the recent BTC move, think about what just happened to the Chinese Yuan
Scott Melker of Texas West Capital says he thinks traders in China may be “scooping up” Bitcoin to avoid the fallout from the US-China trade war.
The market continues to boom with the bitcoin price at 11722 as at the time of writing this article, market cap of 307,610187677. Ethereum, BCH, and LTC also received some boost.
Circle CEO Jeremy Allaire when asked if bitcoin is a sort of safe haven as there is a lack of correlation to this global turmoil, he said humanity has created a non-sovereign mechanism to store their money in something with value and the same time can exist anywhere without censor. he said Btc must be a valuable asset in that aspect
retailers are speculated to suffer more with the trade war as China has created a new frontier when asked if regulators will step in on Bitcoin, Circle CEO Jeremy Allaire said each region will have to make its own regulation on it.
He said rules that apply to digital commodities exist and should apply to all digital currencies
He further said China is mobilizing to lunch its own cryptocurrency in response to Facebook libra ideas and that China is way ahead with Us falling behind. China is going to allow its currency weaken and is trying to educate its people about Cryptocurrency.
China Maybe responding to the US Tariffs by weakening its currency
There are more than $27 trillion in Chinese deposits alone, yet the total crypto market cap barely eclipses $300 billion. If only 1% of Chinese deposits moved into Bitcoin to facilitate capital flight
Trump had earlier on placed a 10 percent tariff on china last Thursday as China threatened to respond on August 3rd with its own tariff.
Lawrence Lindsey the CEO of the Lindsey group when interviewed says a total of 16 percent tariff rate being on china is the reason why they devalued the currency and that they may be trying to pick up the cost of the tariff by making themselves poorer.
The Hongkong protest was also attributed to the weakening currency. saying Chinese people are trying to get their money out hence probably seeking safe heaven and thus weakening their currency by buying assets.
The former US ambassador to China under Obama says china is being resilient and that China is more confident than it was years ago and has more capital control.
When asked if the trade war can be won, he said the trade war can not be won but that The US needs patience with China.
China also responded saying they might also stop purchasing egg products and boycott some other US goods.
What is the real motive behind the devaluation?
First, China may be trying to attract new investors and by the devaluation of its aims towards stabilizing its economy that is already suffering from the trade war
If this trade war continues, it wouldn’t be surprising to see capital flight accelerate from China and Hong Kong in the short to medium term.
Another reason is that China might be playing a Tit for tat strategy as they have decided not to purchase any US agricultural products according to the report from the Chinese news agency. The US agricultural sector will be affected if China decides to go ahead with its decision.
lastly, currency outflows in relation to Hongkong may be the reason behind the devaluation to stop the Chinese from further selling of their currency for assets.
China may have switched stance from banning $BTC to explaining why it is valuable and is a safe-haven asset and now China starts a currency war by devaluing the YUAN before the United States has the chance to do the same to the dollar
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