The value of major world equities is on a free fall, due to the effects of the global trade war. The expected hefty cuts on US interest rates have further spooked investors, slowing investments. Health-care and Tech shares like Apple have been most affected. BASF, the German Chemicals giant, is raising the alarm as its shares sank by 5 percent.
In contrast, Bitcoin is on a steady climb, and analysts are predicting a further steeper rise ahead. Bitcoin, however, is not the only digital asset in the limelight. Litecoin, Ethereum, and other altcoins are surging ahead too. Bitcoin is up more than four-fold in short six months while BCH, ETH, and LTC are registering impressive gains over the same time frame.
World Trade in Turmoil
BASF has blamed the China-US trade war and the global economic slump for its woes. However, it is not the only German business in trouble. Deutsche Bank‘s shares tumbled by 9.4 percent in two days after its 18,000 employee job cuts announcement. Besides, Apple’s shares have been downgraded, and the S&P 500 is still slipping.
According to analysts, the US business cycle is experiencing a downturn. In addition, forward-looking indicators such as global trade and global PMIs are in contraction territory. According to a Morgan Stanley analyst, “companies have begun cutting their 2019 profit forecasts, citing the trade conflict as a reason.”In the UK, things are not looking any better as the no deal Brexit shadow looms.
Presently, analysts are awaiting the results of the Fed Chairman’s grilling by Congress on Wednesday. There is hope, however, that the relaunch of the trade talks between China and the US might begin to ease sentiments. There, nevertheless is skepticism on the outcome as both parties take rather hard-line stances on their differences.
Amongst commodities, factors such the tensions in the Middle East coupled with the trade dispute, have forced oil prices into a dip. The pressure brought on by the Iranian nuclear program row has not helped much. OPEC and its allies are, however holding up the prices to prevent any further declines.
Bitcoin and Crypto Are Shining
Just like Bitcoin, gold’s values have been on the rise as panicky investors seek safe haven assets. The Chinese under US trade sanctions are, for instance, purchasing more Bitcoin. Andy Brenner, the International Fixed Income at National Alliance Securities head, notes the sharp divergence between BTC’s recent performance and the Yuan. He says:
“If you were in China and you wanted to diversify, it would seem logical that Bitcoin would be a short term alternative. While we do not see the direct flows of who is buying bitcoin, we can see that the bid for bitcoin in this latest run has coincided with a big downtick in the value of the Chinese Yuan versus the dollar.”
Crypto enthusiasts are waiting the day that Bitcoin replaces fiat in payments. Due to its volatility, the digital asset still has developments to undergo before this level of mass adoption is achieved.
In the meantime, it has taken its place as digital gold. Billed as the ultimate store of value, the cryptocurrency’s price movement has a low correlation to the traditional markets. In a low-interest rate environment, Bitcoin and gold emerge as the alternative assets of choice.