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Can Trump’s NAFTA renegotiation pump up Bitcoin prices?

Posted on November 12, 2016 | by [email protected]

President elect Donald Trump has had renegotiating NAFTA agreement in his agenda right from the start of his campaign. He has been very vocal about how USA has had an unfair position in the agreement and renegotiating it to US’s advantage. The focus of the renegotiation is to provide better employment opportunities in the country, thereby improving the employment rate. Let’s look into how Trump presidency and changes in NAFTA will affect the cryptocurrency world:

NAFTA and its significance:

The North American Free Trade Agreement is an agreement signed by Canada, Mexico, and the United States. This led to the creation of a trilateral trade bloc in North American continent. For over 30 out of the 50 States, Canada or Mexico rank as the first or second largest export market. Many American small business exporters first foreign customers are in Canada or Mexico. NAFTA and U.S. trade with Canada and Mexico have supported over 140,000 small and medium-sized businesses. U.S. manufacturing exports to NAFTA have increased 258% and maintain a growing manufacturing trade surplus with Canada and Mexico.

Trump’s plans and early allegiance:

From the onset of his campaign, Trump has addressed NAFTA a few times, calling it “the single worst trade deal ever approved in United States”. He also added that if elected president he will either renegotiate it, or we will break it. A range of trade experts have said that pulling out of NAFTA as Trump proposed would have a range of unintended consequences for the U.S. This includes reduced access to the U.S.’s biggest export markets, a reduction in economic growth, and increased prices.

Nevertheless just after a couple of days of being elected, Trump was able to get Canada on board for renegotiations. Canadian Prime Minister Justin Trudeau, a staunch proponent of trade, announced his willingness to head back to the negotiating table.

Trudeau said:

“I think it’s important that we be open to talking about trade deals. If the Americans want to talk about NAFTA, I’m more than happy to talk about it.”

How would this affect Bitcoin:

Any renegotiation in the favor of USA would mean increased trade and job opportunities. Most of the economists predicted recession and obliteration of US jobs because of the negativity around the campaign. But while the markets haven’t really been that shaken up with the news of Trump’s presidency. Moving forward with negotiation would create more jobs and create opportunities better trades. Exporters always look to cut down on the transaction charges for their trade deals. Hence with increased trade deals, there can be significant increase in the volumes and price of Bitcoin.

Brazil in Deep Trouble: Bitcoin and Blockchain are what Brazil needs right now?

Posted on October 12, 2016 | by [email protected]

Recession stricken Brazil is the world’s seventh largest economy with a population of 207.8 million and GDP of US$1.775 trillion. Brazil’s worst recession in recent history continued as rising unemployment and deepening political turmoil dragged the economy into further decline. In the second quarter, Brazil’s economy contracted 3.8%, after shrinking 5.4% in the first three months of the year. It’s the longest recession since the 1930s for Brazil, Latin America’s largest economy.

The situation went from bad to worse as the President Dilma Rousseff was impeached owing to large scale corruption. While the proceedings in Brazil are currently bleak, let’s look into the possibility of Bitcoin adoption setting things right:

Bitcoin adoption currently:

The Bitcoin adoption in Brazil has been on the rise owing to the varying economic conditions. The recession cycle followed the pattern where Brazilian Real appreciated first and then went on to depreciate starting a probable hyperinflationary cycle. During the course of this pattern, there has been a significant uptick in the Bitcoin trading volume from Brazil. The dynamics of the economy and exports prompted people to look for alternatives, which turned out to be Bitcoin.

Brazil is the largest exporter of soft commodities in the world. During the deflationary part of the cycle, the Brazilian Real appreciated due to significant capital inflows. For major exporters, this was a setback as they wouldn’t be getting more local currency in exchange for their goods. Hence an alternative, they turned to receive payment in Bitcoin to be later converted into local currency when Real depreciated.

How Bitcoin can be a solution:

For an economy that is struggling, people’s faith in its currency fading, an alternative system has to be opted. Just like Government bonds where the Government backs fiat currencies, the central bank can alternatively back Bitcoin based assets. What makes this even more feasible is the transparency the underlying technology provides in such arrangements.

This decentralized system can be in place till the economy achieves stability. Later the asset holders can cash in for local currency. These assets unlike bonds can be transacted peer to peer without any processing fee.

How Blockchain adoption would be a relief:

The settlement time in Brazilian market is abnormally slow. The average settlement period for credit card transactions in Brazil is D + 28 which is very slow compared to western markets. Slow settlement times amount to loss of value of transactions due to holding up of the money. This would mean the loss of investment opportunities in time. A study by PWC revealed that Brazil has over 22 million [small and medium-sized enterprises] and micro-businesses. The mobile penetration is upwards of 132%, which has created a fertile ground for mobile payments.

Hence Blockchain based settlements which are quicker and more transparent are exactly what Brazil is looking for. Fortunately there has been significant development on this end with major banks and Mastercard trying to implement Blockchain based transactions in Brazil.

Is Bitcoin an exit option for recession stuck economies?

Posted on October 9, 2016 | by [email protected]

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.