Whenever United States President Donald Trump talks about microeconomic matters, the financial world listens. Economists often shake their heads, finance ministers look at each other in disbelief, and market analysts pay close attention to what this erratic world leader has to say. Forex traders are known to plan market positions around the reactions to statements made by Trump, particularly with regard to currency issues, and this is a trend extending to the Bitcoin markets.
Trump’s Effect on Global Economic Markets
All it takes for Trump to disrupt global markets is a single Twitter update; for example, on the eve of his Fourth of July speech, the U.S. dollar experienced a sudden dip because Trump suggested that China’s manipulation of its currency is something that the Treasury and Federal Reserve should consider. Naturally, active currency manipulation is something that all sovereign central banks should stay away from; Venezuela and Zimbabwe are two clear examples in this regard, but Trump seems to stick to the simplistic notion that a lower dollar is more attractive to importers of American goods.
What many Bitcoin traders interpreted from the aforementioned Twitter update is that Trump supports a race-to-the-bottom scenario involving the greenback, which can be translated into a Bitcoin buying opportunity. Indeed, the BTC/USD spike resulting from that tweet started at $10,816 and culminated near the $12,000 mark in just a few hours; naturally, a massive taking of profits ensued, thus pushing BTC into retreat mode.
Cryptocurrencies Investors Find Ways to Interpret Trends
Trump is not known to have an opinion on digital currencies; there is a pretty good chance that he would not understand blockchain tokens, let alone how cryptocurrency markets work, but his dubious macroeconomic comments and moves can have major consequences for day traders. To this effect, the most common Trump play among Bitcoin traders is to buy whenever he blames China for manipulating the yuan. The rationale of this play is that if Trump really wanted to weaponize the U.S. dollar, he probably would not be able to, but those who believe he could do so may consider a flight-to-safety reaction such as stockpiling Bitcoin instead of investing in forex pairs such as EUR/USD. Perhaps it would be easier to just short the greenback, but not all traders like to take short positions.
In the end, the lesson to learn from Trump’s statements on major currencies is that they can impact Bitcoin trading, and this could go one way or the other; the key is to react with the adequate market position.