As the outlook of the global economy is changing, many countries in South America, Africa, and Eastern Europe are facing an economic crisis like the situation with increasing sovereign debt and plunging currencies. This scenario of depreciating currencies has bought the stability of Fiat currencies under question and if research undertaken by Pension Partners is to be believed, some currencies have been found more unstable than the Bitcoin.
Bitcoin plummeting not as bad compared to some Fiats
2018 has definitely not been the year for the crypto enthusiast as a lot of cryptocurrencies has nosedived. The bellwether crypto coin, the Bitcoin, itself has plunged more than 50% from its peak of USD 20000. This plummeting of prices had bought cryptocurrencies’ stability with respect to their store of value and medium of exchange, under question. But with changing economic scenarios, fiat doesn’t seem to be doing any better. Pension Partners who carried out an analysis of Year-to-date (in 2018) return of cryptocurrencies and certain fiat currencies vs the dollar revealed that Bitcoin that dipped 46.7% (excluding Bitcoin’s significant percentage gains throughout 2017) was much stable than Venezuelan Bolivar, Sudanese Pound, and Argentine Peso which fell 99.99%, 61.61%, and 50.5 % respectively. One may argue that these economies are not the greatest in the world to draw a comparison with, but the nascency at which cryptocurrencies and the population that these countries have, Bitcoin’s adoption here would definitely be impactful.
According to the research the top 3 worst performing cryptocurrencies have been Qtum(-91.3%), Bitcoin Gold (-90.6%) and NEM (-89.1%), while the best of the falling lot have been EOS (-15.7%), VeChain (-27%) and Bitcoin (-46.7%), which on the fiat side the worst have been Venezuelan Bolivar, Sudanese Pound, and Argentine Peso which fell 99.99%, 61.61%, and 50.5 % respectively while the best among falling lot on fiat side has been Jamaican Dollar, Uruguayan Peso and Indian Rupee falling 9.3%,-9.8% and 10% respectively.
Crypto vs. Fiat Currency returns… pic.twitter.com/3g4q5s8hhs
— Charlie Bilello (@charliebilello) September 2, 2018
Tough times ahead for various economies may improve adoption of Bitcoin
The global debt is continuously on the rise reaching $247 trillion while the financial assets market is looking at its impending crash. With the economies already in crisis, emerging markets are going to be affected even more. In the first quarter of 2018, this debt rose by $8 trillion including all the major countries and debt types comprising of consumer, business, and government. The rising trade war at the world level especially between the US and China that is also affecting the connecting economies but going forward it can slow the growth of the world economy and can also trigger another financial crisis which seems to be getting into effect in some countries. Emerging markets like Turkey, Brazil, Argentina, and South Africa are vulnerable to the risks. As the condition of various countries approaching economic crises like situations, the adoption of bitcoins seems to be increasing in these countries. This has been seen in Turkey, Venezuela, and Argentina. As more and more countries move towards sovereign debt traps, people would follow suit of switching their federal fiats to cryptocurrencies especially bitcoins.
With the way, the world order is changing and they way indicators predict the situation is going to be worse for certain economies bring Bitcoin to the rescue thus increasing its adoption as a hedge against these crises.
Will Bitcoin be able to provide an effective hedge to citizens and rise equivalent to gold? D let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.