Forbes is reporting an interesting perspective of what a China bond sell-off could do to crypto prices. Who knows if it’s true, only time will tell. But the discussion of the possible interconnection of bonds and tariff wars from around the world and how those changes could affect crypto prices is definitely something to read up on. Crypto prices don’t just exist in a vaccumm, immune to other market movements and fundamental changes. Have a read.
Here’s how it will happen:
“Upon US bonds sell-offs, money would then flow to other Treasury bonds,” explains Gramatica. “The two biggest rivals to U.S. Treasury are German bonds and Japanese government bonds. However, both of those papers have low-yield returns than US bonds.”
Then there’s gold. “Gold is an alternative yet with much less return, liquidity and it has high carrying costs,” continues Gramatica.
And there’s Bitcoin. “Bitcoin, however, can observe a surplus of money flow as an alternative store of value pushing cryptocurrencies prices up. Bitcoin, and consequently other cryptocurrencies, is arguably a superior store of value due to its durability, limited supply, predictable inflation and ease of transfer.”
Still, the likelihood is very low, according to Gramatica, as this move would be self-destructive for China. It will devalue the US dollar against the yuan, making Chinese exports more expensive, and leave China with worse alternatives to store money.