Despite the 2018 cryptocurrency bear market, bitcoin trading volumes are close to their 2017 heights in emerging markets. Most notably, emerging markets where sovereign currencies have embarked on a downward spiral due to political abuses and economic mismanagement. Narrowing it down even further, in Turkey, Argentina, Venezuela, and Zimbabwe, 2018 has seen bitcoin trading volumes soaring new all-time heights.
The reason is clear.
“Economic crises will drive (cryptocurrency) adoption,” Coinbase CEO, Brian Armstrong.
Turkey has delivered one of the most recent examples of a growth spurt of cryptocurrency adoption following economic manipulation by political powers. For the past years, Turkey’s President, Tayyip Erdoğan’s has been implementing insane economic policies that resulted in a downward arc in the value of the country’s sovereign currency, the Lira. As policy changes and power abuse became more extreme to the point that Erdoğan appointed his son-in-law as Finance Minister in July this year, the currency’s value crashed by over 20 per cent within a few hours.
During this period, Turkey’s largest exchange, Koinim, saw a 63 per cent increase in Bitcoin trading volume while the BTCTurk and Paribu exchanges reported a rise in trading volume by respectively 35 per cent and 100 per cent. The increased demand pushed the price of bitcoin in Turkey up to $7000 — over $500 higher than the global average bitcoin price.
Venezuela is another well-known example of where citizens have turned to bitcoin to hedge against a severe drop in purchasing power of their local currency. In August 2018, Venezuela devalued its old currency, the Bolivar, by the equivalent of 96 per cent and pegged its replacement currency to the controversial Petro cryptocurrency. Media reports referred to the country’s situation as “a full-blown financial panic and the breakdown of economic order” and lay the blame squarely at the feet of President Maduro who had “destroyed confidence in the country’s institutions and currency, and his new plan will make it worse.” On Twitter, Venezuelans railed against the increasing measures of oppression by the State, such as refusing to issue citizens with new passports. Others reported on “the great exodus” where Venezuelans began escaping on foot, crossing half of the continent to reach Peru or Ecuador.
As Venezuelans fled their nation, Ryan Taylor, the CEO of the Dash Core Group, told Business Insider that the country had become the second biggest market for the Dash cryptocurrency. With almost one hundred new merchants accepting the cryptocurrency each week, and thousands of wallets being downloaded each month, it is clear that interest from both businesses and consumers keeps rising.
Venezuela and Turkey are but the most recent stories of citizens fending off the economic impact of their corrupt governments by turning to Bitcoin.
In Zimbabwe, the use of cryptocurrencies has grown exponentially as the government sent the country down a spiral of hyperinflation and started restricting the flow of cash into and out of the state’s borders. At times, bitcoin was trading at an 85 per cent premium in the country.
In neighbouring South Africa, interest in Bitcoin often coincides with socio-political shocks such as when former Finance Minister, Pravin Gordhan was sacked in a controversial reshuffle of parliament (March 2017), and the nation’s debt was downgraded to junk status (November 2017).
In Argentina, the South American country with the second highest inflation rate, after Venezuela, people have started showing signs of preferring bitcoin to their own national currency. Though bitcoin penetration in Argentina is still relatively low compared to other South American countries, it is gaining momentum with an influx of new bitcoin ATMs in the country. What is more, in May 2018 Argentina’s Banco Masventas became the first bank in the world to ditch SWIFT payments in favour of bitcoin for cross-border transfers.
“Countries going through economic crisis and pockets of people in those areas are getting interested [in crypto]. There is interest among those people with the highest pain point in having stable currency [...] In the next three-five years countries going through economic crisis could see people organically adopting crypto as an alternative.” Coinbase CEO, Brian Armstrong
It is not difficult to see the financial appeal of exchanging your defunct fiat currency for cryptocurrency. However, could there be more to the growing Bitcoin adoption in these markets than the monetary motivation? Bitstocks’ Portfolio Manager, James Coughlan weighs in on the matter:
What Bitcoin is attempting to achieve is to provide the individual with sovereignty. The reason why personal sovereignty has become such an essential principle in our times is because of the way authorities have interfered in society over the past decade or two. It has become impossible to ignore the way that governments and central banks are engineering society to the detriment of the citizens they represent. One example is the implementation of Quantitative Easing (QE) which is where the central bank, essentially, hit a big red button to print more money. Every time they print more money, they devalue the pounds and pennies in our pockets. We do not have any control or say in the process.
Bitcoin is giving control back to the individual. With the actual implementations and utilities of Bitcoin’s blockchain technology, it gives power back to the people by letting them vote and choose on ‘policy changes’ and future development of the project. By recording transactions in an immutable ledger, the blockchain gives us full transparency, allowing us to know precisely what is going on within the network.
Now imagine a world where national governing is based on blockchain technology. The situation we had in the UK about five years ago where the Conservative Party were covering up the nature of their expenditure and sources of donations, would have been impossible if blockchain was being used. If they had been using something like a ‘Conservative Coin’ based on blockchain technology to underpin the Party’s income and expenditure, the public would have full transparency into how tax money was being spent.
Bitcoin, therefore, has the potential to re-enable sovereignty and transparency across the board, and these are the qualities that make it attractive to individuals who are stuck in countries with corrupt governments.
The primary focus of Bitstocks is to enable individuals to join the Bitcoin movement of increasing sovereignty - their own, and that of people across the globe in whatever political scenario they find themselves in. We want to give people back the freedom to invest their funds in a system that they have control over and full transparency into. The financial returns of the investment, in turn, provides our clients with more freedom over how they spend their time, as they are no longer with no better avenue than trading the precious hours of their lives to make ends meet.