It's Surprising Bitcoin Cannot Rally While EM Currencies Plummet


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Hmmmmm (Shutterstock)

Bitcoin has been declining steadily for the past two weeks.  Whether that is related to the OKEX bitcoin futures problems  or renewed concerns that Bitcoin ETFs are still unlikely, I don’t know.  But what is surprising, is how poorly Bitcoin has done while Emerging Market currencies have been in freefall.

The Turkish Lira has declined by 30% in two weeks, while Bitcoin declined by a similar amount.  It isn’t just the Turkish Lira that has been hit.  The Mexican Peso gave up two weeks of gains in the past 2 trading sessions.  The Argentine Peso declined almost 7% in three days while Bitcoin dropped 10% in the same time frame.

I would have expected Bitcoin and Cryptocurrencies to do well in times of Emerging Market stress.  If you live in an emerging market country, where the political situation is tenuous and your currency is devaluing rapidly, it would make sense to want to store it, or hide it, or invest it in cryptocurrency.  In theory Bitcoin is the ideal ‘hedge’ for a person of wealth in such a situation.  In fact, we used to see that sort of behavior.  One of the first Bitcoin surges that I can remember was during the banking crisis in Cyprus.  Ever since then, it has seemed that crypto benefits when countries or regions experience similar stress (North Korea has allegedly been a big driver of crypto demand).

So why isn’t it rallying this time?

Has everyone who ‘needs’ crypto already bought it?  That would make some sense, since the devaluation might be a surprise in terms of timing, but the conditions to set such a devaluation in motion have been in place for a long time.

Is it also possible, that Turkey has been accumulating Bitcoin and is now selling it?  That might be far-fetched, but it seems very strange than Bitcoin is not only not reacting positively, but it seems to be moving down, almost in lockstep with the Lira.

In what should have been crypto’s moment to shine, it has disappointed, which is something every bitcoin owner needs to think seriously about why and what the ramifications are.

The other ‘hedge’ that should have done well is gold, which also failed to rally.

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Hmmmmm (Shutterstock)

Bitcoin has been declining steadily for the past two weeks.  Whether that is related to the OKEX bitcoin futures problems  or renewed concerns that Bitcoin ETFs are still unlikely, I don’t know.  But what is surprising, is how poorly Bitcoin has done while Emerging Market currencies have been in freefall.

The Turkish Lira has declined by 30% in two weeks, while Bitcoin declined by a similar amount.  It isn’t just the Turkish Lira that has been hit.  The Mexican Peso gave up two weeks of gains in the past 2 trading sessions.  The Argentine Peso declined almost 7% in three days while Bitcoin dropped 10% in the same time frame.

I would have expected Bitcoin and Cryptocurrencies to do well in times of Emerging Market stress.  If you live in an emerging market country, where the political situation is tenuous and your currency is devaluing rapidly, it would make sense to want to store it, or hide it, or invest it in cryptocurrency.  In theory Bitcoin is the ideal ‘hedge’ for a person of wealth in such a situation.  In fact, we used to see that sort of behavior.  One of the first Bitcoin surges that I can remember was during the banking crisis in Cyprus.  Ever since then, it has seemed that crypto benefits when countries or regions experience similar stress (North Korea has allegedly been a big driver of crypto demand).

So why isn’t it rallying this time?

Has everyone who ‘needs’ crypto already bought it?  That would make some sense, since the devaluation might be a surprise in terms of timing, but the conditions to set such a devaluation in motion have been in place for a long time.

Is it also possible, that Turkey has been accumulating Bitcoin and is now selling it?  That might be far-fetched, but it seems very strange than Bitcoin is not only not reacting positively, but it seems to be moving down, almost in lockstep with the Lira.

In what should have been crypto’s moment to shine, it has disappointed, which is something every bitcoin owner needs to think seriously about why and what the ramifications are.

The other ‘hedge’ that should have done well is gold, which also failed to rally.

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