We spent a lot of time talking about how cryptocurrency is advancing in the U.S., but in a lot of ways, its adoption and use in developing countries matters more. This is because they can change their systems more readily than a country that already has a highly efficient banking system in place.
Right now in Argentina, we are seeing an interesting macroeconomic development as investors sell the peso in favour of Bitcoin. The recent election results have put investors on guard, and now they are afraid of losing their shirts on these deals.
When the incumbent, Mauricio Macri, was defeated in the election on Monday, it was a sign of higher risk in the Argentinian economy. As a result, so many investors bought Bitcoin that there was a $400 premium in Argentina. LocalBitcoins is showing a premium on the price of Bitcoin as well.
Debt and Other Problems
Nobody believes that Argentina can repay their sovereign debt, and this has everyone on edge. Bitcoin has always been a naturally strong contrarian bet, and in a country that has undergone so much volatility in currency like Argentina, it is natural that people would buy a ton of it. What is surprising is the premium it is trading at, and what that means for the collapse of fiat currency.
Latin America has been an accidental testing ground for Bitcoin since Venezuela’s currency collapsed and citizens started to adopt Bitcoin as a more stable currency.
In similar news, Bantotal just announced a partnership with cryptocurrency exchange Bitex that should lead to 60 banks in Latin America being able to use crypto for cross-border payments. This service would reduce the transaction times by approximately 5 times, and be in competition with Stellar, Ripple, and other cross-border payment providers.
But Bitcoin has its international controversies, too. There is currently an investigation underway regarding North Korea and their hacking of several exchanges in South Korea. It is thought to have been executed by the government, although there is not enough proof yet.
The broader economic climate is becoming increasingly relevant to Bitcoin, as investors across several continents view it as a safe hedge against the currency wars and other macroeconomic difficulties that may be coming. For example, since the currency war with China starts a few months ago, Bitcoin’s price has appreciated approximately 100%. This uptick is no coincidence, and could represent an unraveling of the current power structures and monetary systems.
Brian Kelly of CNBC has said:
“This is the perfect storm for Bitcoin. You have multiple currencies around the world breaking down at the same time that institutional investors are actually embracing this asset class. So the combination of the two things has funneled all the money into Bitcoin.”
We’ve discussed it before, but the change to negative interest rates by several Central Banks, as well as recent moves by the Federal Reserve all indicate that we are heading into a riskier economy. And from now on, we will see a never-before-seen dynamic play out as Bitcoin is treated as a flight to capital for investors.