Why Bitcoin Continued Falling Today
Key Points
China is restricting contracts with a South Korean shipbuilding company, Hanwha Ocean.
The move is likely retaliation because Hanwha Ocean works closely with the U.S. government.
Bitcoin investors view the rising tensions between China and the U.S. as bad for the economy.
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The value of Bitcoin (CRYPTO: BTC) continued falling today after China said it was putting restrictions on a major South Korean shipbuilder, Hanwha Ocean Co. The company has some naval contracts with the federal government and owns a shipyard in the U.S.
Bitcoin investors are concerned about escalating tensions between China and the U.S., and pushed the cryptocurrency down by as much as 3.7%. As of 11:53 am ET, Bitcoin was down by 2%.
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Trade war fears are spooking investors
Investors were nervous this week after President Trump threatened to slap 100% tariffs on some Chinese imports. Their concerns were compounded today, as China has seemingly retaliated to the tariff threats by putting restrictions on Chinese companies working with Hanwha Ocean Co. The company works closely with the U.S. on shipbuilding and has some naval contracts.
The U.S. government is concerned about China's growing dominance in shipbuilding and recently set up a probe to investigate its shipbuilding expansion. China appears to reacting to this and Trump's tariff threats with its recent shipbuilding restrictions.
Bitcoin investors are concerned that rising trade tensions could result in a slowdown to the U.S. economy. When the economy is booming, riskier investments like cryptocurrencies appear more attractive. But that narrative shifts if the economy slows down and investors look for safer places to put their money.
More volatility could be on the way
Bitcoin investors are trying to get a sense of where the economy is headed, and they don't like what they see. Trade tensions with China have come at the same time that the U.S. labor market is showing signs of slowing down.
It may be too early to know whether the economy will slow, or if the tension with China will turn into a trade war that causes economic pain. But the uncertainty is already causing Bitcoin investors to look for safe havens. If the uncertainty continues, Bitcoin's value could fall further over the short term.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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