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Bitcoin Rising as Tradewar Intensifies

August 6, 2019
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“Everyone has the brainpower to make money in stocks. Not everyone has the stomach”
― Peter Lynch

5-Day Change

  • Bitcoin: $11,757.46
    +16.32%
  • Ethereum: $229.50
    +4.85%
  • S&P 500: $2,867.50
    -4.62%
  • Dow Jones: $25,850.80
    -4.62%

Bitcoin Rising as Tradewar Intensifies

So much for a predictable economy...as US President Donald Trump unexpectedly launches a fresh volley in the US-China trade war. On Thursday, the US leader threatened to impose a new 10% tariff on $300 billion worth of goods, on top of the already existing 25% tariff on $250 billion worth of goods. For its part, Chinese officials retorted that if the tariffs are indeed applied, they will take ‘necessary countermeasures.’ But even as markets fell in response to Trump’s tweet, Bitcoin surged up 8%, reversing a two-week-old downtrend.

How did the markets react? About as well as anything that responds to news of fresh tensions between two economic superpowers - which is to say not very. The S&P 500 has dropped 2%, and the Dow Jones has fallen 1.5% since the news was announced, driven in part by the specific content of the proposed tariffs, namely, Apple products (including the iPhone), as well as toys and footwear. This means that major Dow Jones and S&P component companies like Apple and Nike are feeling directly impacted.

What's all this about Bitcoin? Unlike the equity markets, Bitcoin has pulled into a rally over the past week since the tweet was sent, currently sitting at 16.82% above Thursday’s price. This move, after weeks of falling prices and indecision in the Bitcoin price, gives higher credence to theories that Bitcoin is increasingly used as a safe-haven asset. And, in the context of the 2019 bull run and increasing global tensions, those using Bitcoin as a safe haven may have the right idea.

What about China? China is none too happy about this latest, out-of-left-field attack by Trump. But China’s response may be a little slow in coming, as many high-ranking Communist Party officials, including General Secretary and President Xi Jinping, leave for a two-week retreat to discuss policy. China has already taken some preliminary measures, including letting the yuan fall to its lowest price in a decade and directing state-owned companies to suspend imports from US agricultural firms.

Wut We Think: Trade wars are bad for everyone involved is a cliche nowadays, but there’s always a way to take advantage of any opportunity. In this case, the opportunity is Bitcoin. Even as financial markets slump and investors struggle to make sense of the often erratic policy of the current US administration, Bitcoin, with its decentralized nature, moves to its own beat. The Bitcoin price may move in mysterious ways, but there are some hard facts to rely on: A weak yuan makes Chinese imports more attractive to US firms, but it also makes foreign products more expensive for Chinese citizens. Add that with a country that has 29% of the world’s crypto trading volume, and suddenly, Bitcoin as a safe haven asset starts to make a lot more sense.

 

Apple struggles after Q3 earnings report and US trade war

Apple seems to have lost its luster...at least if its recent earnings report is anything to go by. Apple’s Q3 earnings revealed a 13% drop in net income over the last quarter, while revenue rose only 1%. This bad news coincides with a sharp drop in the stock price on Thursday, after the tariff tweet by US President Donald Trump. This left the iPhone maker’s stock hovering around 11.6% lower compared to last week. 

What happened to Apple? One big culprit: iPhone sales, once a mainstay of the company, now account for less than half of Apple’s revenue, for the first time since 2013. Another suspect is the sluggish Chinese market, which reported 4.1% lower sales in the region this quarter. Of course, there’s also the hard-to-quantify morale hits - with the departure of storied Apple designer Jony Ives, Apple doesn’t have a lot of the old Steve Jobs guard around, and the cachet it gained during Jobs’ tenure is now fading.

Is there any good news? Apple is still an enormous tech giant, even with this quarter’s performance, and it is working to shore up its weakness, namely, by boosting services and wearables. Services, including things like Apple Music (formerly iTunes) and wearables - stuff like the Apple Watch and AirPods - rose 12.6% and a whopping 48% respectively.

Is the bleeding going to stop? It’s important to emphasize that even with the 13% drop in net income, the 1% boost in revenue was technically enough to mark it as a record quarter for Apple. There are some big product launches on the horizon, including Apple TV+ and a new MacBook Pro, but Apple is finally going to feel the brunt of sanctions, as Apple products and components are listed on the draft tariff list - despite Apple efforts to have them excluded. 

Wut We Think: It’s not going to be easy for Apple to keep delivering its historical results of record profits each and every quarter. iPhones aren’t the shiny cool status symbol anymore - and AirPods are quickly becoming ubiquitous. Not to mention the tariffs, which will not be sparing the company - and judging by the nearly 12% drop in price in the past seven days, the consequences have already started. That said, Apple Q4 guidance is encouraging, and if the tariffs end up unapplied, then new products and some relief may be in store for the company - and its investors.  

 

Bitcoin Gains Momentum as Altcoins Follow Suit

Bitcoin is back on track, breaking $12,000...and the altcoins aren’t far behind. After rising steadily from $10,000 to $11,000 over the course of the last week, Bitcoin finally broke the critical $12,000 resistance on Tuesday, currently hovering at $12,228. While this represents a 27% weekly growth for Bitcoin, altcoins haven’t been left behind - most are reporting sub 10% growth, aside from Ethereum, which gained 11.54% over the week.

The road to $20,000? Signs are pointing up. This latest surge coincided with the Chinese yuan falling to its lowest level in a decade. With further instability in global financial markets expected, there may be even more of a boost as Bitcoin is embraced as a new safe haven asset - though there is some evidence that Bitcoin is just as vulnerable to external shocks as traditional markets. 

What’s all this about the alts? Good news, after months of bad. Over the past week, Ethereum has gained 11.64%, Ripple is up 1.88%, EOS grew 6.1%, and Litecoin rose 7.89%, which is encouraging for altcoiners who have seen their non-Bitcoin crypto rapidly lose value - though the picture is still disappointing on a monthly chartwith every altcoin in the red, from EOS losing 25% on the top end to Ripple losing 18%. On the other hand, if the current macro instability continues, then a rising tide will lift all boats.

What’re the chances of a reversal? There is bound to be some pullback every time a resistance is breached, but the long-term (or HODL) picture is still looking good, especially as Chinese capital flight turns to Bitcoin. The same can be said for altcoins - especially as some, like Ethereum, finally start to come into their own.

Wut We Think: Bitcoin, despite all its travails, is coming into mainstream appreciation as a safe haven, and that nearly guarantees growth, as investors are spooked by the trade on both sides of the Pacific move into other assets. But altcoins still have yet to live up to their promise, recent gains aside. Bitcoin is the clear leader, making up 67% of the total crypto market cap. Alts keep running into issues of their own, like the three-way fork of Bitcoin SV on Sunday, or Justin Sun’s (founder of the Tron token) legal troubles in China. So while Bitcoin is moving up in the world, altcoins haven’t quite earned the same respect.

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