October 9, 2016

Right from its inception, Bitcoin’s development has been quick and promising. The world was quick to recognize its disruptive nature and Bitcoin’s adoption became fluid. While the status of Bitcoin as an adaptable universal currency still remains ambiguous, it surely has proven its utility. For economies that have been struggling, people have sought to Bitcoin as an alternate in more occasions than one. Let’s look into the situations where Bitcoin actually did better than just saving face in times of crisis:

Fears of Greece exiting Eurozone or Grexit:

In 2015, Greece was in severe recession and in a debt of nearly 1.5 billion euros to creditors. Defaulting on timely payment of the credit might have resulted in Greece leaving the Eurozone. The fears looming the Grexit prompted people to look for alternative methods to pay for Goods and Services. With the local currency inflating at phenomenal rate, there was a clear uptick in the Bitcoin trading. This was a direct result of people investing in Bitcoin so as to hold value against their currency.

20151128_btc1 — Grexit Pushing prices higher and recently Argentinian policies increasing the volumes of trading

As an alternate to monetary reforms enforced, most cryptocurrency supporters argued that Greece could have opted a digital asset model. That is Government could have used decentralized currency to pay pensioners and Government servants initially. Government assets would back this currency and hence can be repaid later. Though Greece took a different path, it is evident from trading volumes that people took to Bitcoin in the time of crisis.

Argentina and Financial repression:

Argentina has experienced the crippling effects of 2008 housing collapse and continued to feel the jitters even in the next decade. Amid the downward spiral of economic decline, the government announced stringent financial restrictions in 2011. This restricts people from buying foreign currency and to send money overseas. This financial repression made some Argentineans to adopt the cryptocurrency as an escape route from government controls.

A pleasant Government change has lead to revoking of reforms, accommodating better policies to save the country. While the economy is recovering, there is an increase in volume and number of companies operating with Bitcoin. While Bitcoin has supported people during the repressive phase, let’s see how it would help Argentina to reconstruct its economy.

Brazil and Kenya:

Rising volumes in Brazilian Bitcoin Trading

Brazil is the world’s largest exporter of soft commodities and it has been in recession for over three years. With its economy weakening, the exporters aren’t getting good value for their exports. Hence they have resorted to payments in bitcoin so as to maintain their value of profits. This resulted in the increased volumes during the harvest period of the soft commodities crop cycle.

Kenya has a high population of unbanked citizens and high micropayment transactions in mobile systems. While Government is tightening its hold on local businesses through tax monitoring, Bitcoin is instrumental in building a regulated system. Major wallets like Bitpesa are actually helping the Government to setup a regulated system. This would allow the businesses to flourish and also be monitored for tax irregularities, if any.

Hence we can see that Bitcoin indeed has been crucial in strengthening or restructuring weak economies in many cases.

Hillary’s fintech policies:

Even before she received the presidential nomination from the US Democratic Party, Hillary has had set agenda for fintech industries. She has proactively stated that if elected, she would push for reduced regulatory barriers for startups and entrepreneurs.

The Clinton campaign stated:

“We must position American innovators to lead the world in the next generation of technology revolutions – from autonomous vehicles to machine learning to public service blockchain applications – and we must defend universal access to the global, digital marketplace of ideas.”

The campaign also added that Hillary will challenge state and local governments to identify, review and legal and regulatory obligations. This would take away the immunity that protects legacy incumbents against new innovators.

Hillary against China and the East:

Hillary as the secretary of the state has historically intimidated China throughout her term. Be it her stance on International waters or trade agreements, she has always opposed China firmly. What would be instrumental to digital currencies is the trade agreements with China. Just like Donald Trump, Hillary opposes the Trans-Pacific Partnership. She supports trade agreements that would raise wages, increase prosperity, create more jobs for Americans, and protect our security.

Hillary said:

“We cannot let rules of origin allow China — or anyone else, but principally China — to go around trade agreements. It’s one of the reasons why I oppose the Trans-Pacific Partnership because when I saw what was in it, it was clear to me there were too many loopholes, too many opportunities for folks to be taken advantage of.”

This means, Hillary would alter trade agreements to tighten US’s hold, which would spell discomfort for China. If Chinese implement unorthodox monetary policies, that would disturb Yuan and we are likely to see heavy movement in Bitcoin market.

Hillary against Wall Street:

On her first speech as the Democratic presidential contender, Hillary took a dig at Wall Street. She tore into CEOs, hedge fund managers, Corporate America — and the Republicans who support them. She believes that wealth centered on Wall Street is detrimental to the economy. With short term investments for high profits and low taxes paid based on their investments, common man is at disadvantage. She believes in long term investments that would open up job opportunities for Americans. She also implores Wall Street to think about the possibilities.

Would these redirected investments on Wall Street result in Blockchain opportunities for firms or would be in the direction of other industries is to be seen.

Day: October 9, 2016

Is Bitcoin an exit option for recession stuck economies?