Increased Economic Protectionism: Threat or Opportunity for Bitcoin?

The slowdown in the global economy has resulted in many governments imposing protectionist measures in their countries. Could this pose a threat to Bitcoin?

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Increased Economic Protectionism: Threat or Opportunity for Bitcoin?

The slowdown in the global economy has resulted in many governments imposing protectionist measures in their countries. Could this pose a threat to Bitcoin?

Slowdown in World Trade Growth

Globalization and the corresponding increase in world trade has driven global GDP growth for the last couple of decades. Countries have found their niche areas in the global economy and have flourished – China in manufacturing, India in software, Philippines in Business Process Outsourcing, etc.

However, the rapid growth in global trade seems to be plateauing. According to a recent World Trade Organization report, the forecast trade growth rate for 2017 has been cut to 1.8% to 3.1% (from 3.7% previously). There is a possibility that global trade growth would be lower than global GDP growth (forecast of 2.2%)

Brexit and Trump - examples of protectionism

When faced with tough questions about the performance of their economies, politicians have an easy excuse – blame it on other countries. Donald Trump's rapid rise as a politician shows that he could tap into the unease of Americans about immigrants and China taking away jobs.

Brexit shows that in spite of London's position as a global financial center, the people of UK as a whole felt that their jobs were threatened by immigrants. Protectionist measures are being imposed by multiple countries in varying degrees, as indicated by the growing number of trade disputes.

Bitcoin knows no borders

When a trade happens between 2 parties located in different countries, the question of which currency the trade has to be denominated in arises. If neither of the 2 parties has sufficient bargaining power, the trade is denominated in a neutral, liquid currency like the Dollar.

This is a role Bitcoin could easily have slipped into, once it matures, given its ease of transmission across borders. As the Bitcoin community grows and adoption increases, it would acquire the characteristics of a 'mature' currency – liquidity and low volatility. Global trade, if unhindered by protectionism, could be a growth driver for Bitcoin.

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