Tension is growing between the US, China and Taiwan. The Middle Kingdom demonstrates its strength and threatens to attack the island. How will gold and bitcoin behave in such a situation?
Will China attack Taiwan?
Taiwan is considered a rebellious province of China by Beijing. The topic of reconnecting the island to the mother country and thus overthrowing the regime that is close to the USA comes up from time to time.
The media is talking about the threat to Taiwan again. China conducted military maneuvers around and over the island. On Saturday, they sent 62 military planes towards the island. In turn, on Thursday, three days after the inauguration of the new president of Taiwan, whose policies are unlikely to be to Beijing's liking, the above-mentioned exercises were launched. An island blockade was practiced.
The war did not break out, but we can be almost certain that it was not a matter of “if”, but “when”. The Middle Kingdom is just waiting for the US to weaken and then it will launch an attack. The Americans will not be able to leave their ally alone. Reason? The island is of too much strategic importance, but leaving it to prey would also provoke questions from Washington's other allies about whether it is really a reliable ally.
How will the markets behave?
Let's assume that the China-US war finally breaks out. How will gold and bitcoin behave then? We asked the team of analysts from Cashify Gold about which company allows gold trading.
It must be admitted that China's possible aggression against Taiwan could initiate a completely new type of world conflict, which, in addition to obvious military actions, would include very strong economic frictions.
The United States would certainly stand up to defend Taiwan, and therefore its interests, and such a clear clash of powers will not leave the prices of the assets we are interested in unchanged.
Gold, as one of the safest types of investments for uncertain times, would certainly continue to increase in value in the medium term after the start of such a conflict. All because of institutional and private interest. In other words – during a war, gold protects the state's liquidity against, for example, an embargo, and the private investor – against a decline in the value of a given currency.
– the company replied.
In the case of bitcoin it would be different:
The situation with bitcoin may be completely different, especially in the first phase of the conflict. Assets with higher price volatility do not like economic or geopolitical destabilization. This is well demonstrated by price fluctuations in the wake of Russia's recent attack on Ukraine or Israel's retaliation against Palestine. Taking into account the fact that Taiwan is a leader in the production of semiconductors, which are so important in the entire global electronics industry, news of a military action aimed at the security of this production would certainly have a very negative impact on the prices of most speculative assets, including bitcoin.
And in fact, the outbreak of World War III in practice would be the ultimate test for cryptocurrencies. If they started to become more expensive in such conditions, it would mean that the market already considers bitcoin, and maybe ether, as a safe haven.
However, a repeat of the previous global conflict cannot be ruled out. At that time, shares of American companies were rising in price when the Third Reich attacked Poland, but after the German invasion of France, a long bear market began. The situation changed when the Axis Powers began to lose.
We may face a similar scenario in the future. Due to the fact that the USA has a more liberal policy towards cryptocurrencies than China, the valuation of bitcoin would depend on activities on the front. If Americans were on top, the BTC rate could rise. If Washington were to fail, we could face very deep declines.
