During the recent Token2049 Conference, specialists deliberated on the trade war between the United States and China. One important issue that emerged during the conversation was the possible investment of Bitcoin in the conflict between China and the United States. Experts noted that Bitcoin might evolve into the next ‘arms race’ of some strategy-deficient country in need of retaining or increasing its global economic standing.
Pozsar’s Understanding of the Situation in China
Zoltan Pozsar, founder and CEO of Ex Uno Plures, shared his take on the implications of the trade war as he gave commentary on the situation on April 30. While still in the context of ‘suffering’ from reciprocal tariffs as a form of trade war, Pozsar seems to be more delivered on the rationale explaining why China is in a very difficult economic situation now during a ‘trade war’ period, which he surmised to be like what the US experienced during the Great Depression. Apparently, the economist explained that China’s economy is burdened with a massive and perpetually increasing debt that has to be paid with money earned through exports.
Impact of Tariffs
According to reports, Trump’s tariffs purposefully aim at China’s trade vulnerabilities by controlling exports from China. They predict these tariffs will affect China more than consumers in the West. His reasoning posits that Western consumers facing tariff-induced inflation will simply lower their consumption, which significantly harms China’s economy.
China’s Management Challenges
As Pozsar suggests, China is under immense scrutiny to manage the economic adversity from the global balance of trade. He pointed out that stimulating domestic consumption to offset losses from exports is at odds with the political ideology of the Communist Party. He suggested that this ideological battle makes the crisis harder to solve using traditional policy responses.
Shifting Global Strategies
In the Einfuhrung chapter, Pozsar pointed out that both of the countries seem to be switching their strategic paradigms due to economic stress. He pointed out that the U.S. has recently started to act more like China by funding industrial projects with government stimulus. On the other hand, he pointed out that China has purportedly started to act more West by trying out direct-to-consumer monetary easing asserted policies. At the same time, he pointed out that Europe is strategically malfunctioning by increasing costs to maintain the central banks. As a whole, the gaps in formulating cryptocurrency policy in relation to trade and state strategies, particularly with regard to Bitcoin, become even easier to justify used for world economy.
The Strategic Bitcoin Gap
This shifting landscape was expected to give rise to a strategic Bitcoin gap. As it stands, the U.S. is also reportedly in possession of approximately 1% of the total world Bitcoins in circulation. This has led Dan Morehead, founder and managing partner at Pantera Capital, to argue that it would be rational for the United States to keep expanding its Bitcoin reserves. He drew a parallel with how the US has sustained its gold reserves historically, using it as a reserve asset. With Morehead’s “landmark move” referring to the BTC reserve the U.S. is said to have integrated, he claims this is the foundation of what will become a strategic Bitcoin gap. Other nations, he claims, will start competing with each other to stockpile national Bitcoin reserves. This, he stated, will be particularly marked in countries either allied with or feeling antagonized by the US-dominated financial system.
Adopting Bitcoin as a Geopolitical Measure
The reference claims that there are varying attitudes concerning the strategic usefulness of Bitcoin. Even China’s position, which is, for the most part, anti-crypto and holds an estimated $18 trillion worth of “verboten” BTC, could be altered to support a Bitcoin reserve policy, should such a shift enable an advantage over the U.S. A report that was published earlier this month from VanEck stated that select energy trades with China and Russia are allegedly settled using Bitcoin. It is characterized as striving for U.S. dollar hegemony in the financial world, thus showing the attempted use of Bitcoin in escaping conventional financial systems, which geopolitically is a must. The discussions at Token2049 support the theory, held by certain experts, that Bitcoin is closer to being used in the context of general economic and political relations.
