By CCN: U.S. President Donald Trump announced a trade war with China Friday, hiking tariffs on $200 billion worth of Chinese exports from 10% to 25%. On the same day, the bitcoin price extended its uptrend after jumping above $6,000.
The two events did not share anything except a date. But, according to Ed van der Walt, they probably had an interesting connection.
The Bloomberg reporter theorized that investors were using bitcoin as “trade-war play,” stating that President Trump’s decision to increase tariffs on Chinese imported goods could create geographic price arbitrage. Walt envisioned whether or not smugglers, the ones who would attempt to export Chinese products into the US illegally, were the ones who were purchasing bitcoin.
“Tariffs create geographic price arbitrages, which encourages smuggling, which drives money off-grid, which fuels bitcoin,” said Walt as he connected the dots.
Is bitcoin the ultimate Trade-War play? pic.twitter.com/uVgBlohdcB
— Ed van der Walt 🇿🇦🇬🇧 (@EdVanDerWalt) May 10, 2019
Beyond the Smuggling Theory
Walter’s question-cum-analysis followed decade-long criticism of bitcoin as a tool to drive underground economies. JP Morgan CEO Jamie Dimon once said the cryptocurrency was a fraud and was only attractive to criminals. In a similar tone, Russia President Vladimir Putin said bitcoin creates opportunities to launder funds, evade taxes and finance terrorism.
JPMorgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up https://t.co/9wBV7hDpNP
— CNBC (@CNBC) September 12, 2017
But to think it was the smugglers who were pumping bitcoin since its bottom formation in December 2018 sounded far-fetched, especially when there were other important fundamental factors at play, such as the one propelled by Fidelity Investments. The Boston-based asset management firm recently announced that it would offer Bitcoin trading services to its institutional clients. The cryptocurrency’s rate jumped above…