The reopening of China will shake the world in 2023. After 3 years of confinement, the Chinese authorities have decided to open the country. Well, this reopening has economic consequences. And these economic consequences, in turn, will have an effect on the monetary policy of central banks. Decisions by the US Federal Reserve (the US central bank), in particular, heavily influence valuations in risky assets like Bitcoin. In other words, it is not very sensible for Bitcoin investors to remain oblivious or indifferent to the ups and downs of the world. Everything is interconnected.
This reopening implies an increase in supply and demand. This will benefit some and harm others. In both cases, this openness means distortions. Of course we have to study this in context. At this very moment, the world’s major central banks are raising the cost of credit to reduce demand. In this way, lower inflation. In this context, this reopening adds further inflationary pressures to an overheated system. Which could force the Fed to tighten further. Therefore, the Chinese impact must be followed very carefully.
For a hotelier in Thailand, this reopening is positive, because it means the return of the Chinese tourist. Therefore, a significant increase in their income. For a company with Chinese suppliers, this reopening is also positive, because it can now operate in a “normal” way. I mean, the situation is better for export and import. We are talking about merchandise. But we are also talking about the flow of people.
However, it is a question, at the same time, of greater deflationary pressures and greater inflationary pressures. Raw materials? And the oil? Well, this reopening is positive for Latin America, but it increases the demand for raw materials and oil. but it is negative for Europe and the United States due to what this demand implies for the price of these items. In this case, good news is bad news.
China? The oil? The Federal Reserve? whatHow does all this relate to the price of Bitcoin?? According to the cryptolibertarian narrative, demand is born out of adoption. And this adoption arises from a pseudo-political aspiration.
This movie supposedly plays out this way…Sooner or later, the common citizen will realize epiphany-style that fiat money is a scam. Because, according to certain conservative circuits, the only legitimate form of money is hard money. So, what is basically just an ideological current, for this ideological current, this belief is actually a self-evident truth as clear as the sun. Well, after this mystical conversion, the convert buys BTC as a form of emancipation against the oppression of a system dominated by “progressive Keynesians”. Consequently, the dollar has its days numbered. Why? Well, because, sooner rather than later, people will achieve enlightenment.
For this idiosyncratic bitcoiner, macroeconomic analysis in the context of the Bitcoin price is nonsense. China? The oil? The Federal Reserve? No, Bitcoin is freedom. We are risking the future of the world. Bitcoin is salvation. It is not just any investment. In fact, it’s not about money. “The price doesn’t really matter.” And blah blah blah. Really?
This all sounds very nice. After all, Twitter supports everything. And everyone can be a hero of the story there. Because every utopia is perfect in a tweet. And it is no secret to anyone that the libertarian utopia has conquered the hearts of many bitcoiners. Nevertheless, this conversion adoption has not shown relevance to price action. Then, For the non-idiosyncratic investor, whose only goal is simply to grow financially, all that talk is a waste of time. It is not a question of chimeras and unicorns. It’s a matter of making money. It’s a matter of not losing money. When did it become a sin to want to make money by investing our money? Is it bad?
All the doomsday rhetoric against the establishment proposes an eventual collapse of the dollar and the final victory of Bitcoin in the context of a libertarian revolution.. The crisis arrives. The dollar rises and Bitcoin collapses. The facts have revealed to us that the demand for ideological adoption is not as strong for the price as the demand for speculation. In practice, The price of Bitcoin behaves as a risky asset that is highly sensitive to macroeconomic conditions. Who do we believe? Dogma or evidence? Things are as they are. Not how you want them to be.
Here we have some code in a decentralized database. Numbers and letters in a computer network. As simple as that. This is Bitcoin. A simple abstraction that works like a rate. That. The code represents a rate. It has no intrinsic value. But it does have monetary value. The USD/BTC pair is what we commonly call (for practical purposes) “the price”. It is bought with dollars. And, when sold, you get dollars. Y most buy today expecting to make money from future price increases. Because demand is key to the price of Bitcoin. Which implies that the relationship between the price of Bitcoin and the liquidity of the dollar is extremely close. Who do we believe? Dogma or evidence?
In the investment world, truth is perception. In other words, people can say a thousand things about Bitcoin. But the last word has the price action. Welcome to the free market! Why do people buy BTC? Why do you sell? What is the intention behind the purchase or sale? How is it used? Why does the price go up? Why go down? When does demand increase? When does it decrease? Well, one thing is for sure. The answers are not in Milton Friedman’s books. Nor are they among the economics of the Austrian school. No, the answers are not in the old gold beetle narratives either. Simple. The answer lies in the price action. Who do we believe? Dogma or evidence?
China, welcome back to the world!
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