As Bitcoin’s Price Hits a New All Time High, What Happens Next?
In a chance Google search I discovered that Bitcoin had reached a new all-time high (ATH) today.
I was quite surprised about this. After all, as a full time analyst and commentator on the adoption and development of Bitcoin, you would think it was something I would have noticed.
Not only that, but my Twitter feed should be annoyingly full of pictures of “Lambos” and “Moons,” but it wasn’t. Thank God.
Yet, here it was, in green and white, a simple chart showing a wobbly, but undeniably upwards trend line to a new all-time high, unequivocally confirming that the fiat currency equivalent of one bitcoin has definitely reached a value hitherto unseen … in Turkish lira.
Of course, for those of us who reside outside of Turkey, we may be forgiven for being less impressed with this news than we would if, for example, that number had been denoted in U.S. dollars, British pounds or euros. We may even be dismissive of it.
But, as it turns out, that would be a big mistake.
The reality is that this simple chart actually brings with it a wealth of data that reveals an incredibly detailed story about global trends, the status of the current financial system and a stark warning for the future. That is, if you take the time to look behind the curtain.
In fact, you might be extremely surprised what that data reveals.
I certainly was.
Turkey is the Tip of the Iceberg
While my discovery about Turkey’s new bitcoin ATH was entirely accidental (caused by the clumsy selection of the currency I was actually looking for), it started a process that took several hours to complete.
But first, there was the obvious conclusion to consider.
Since we know that bitcoin is usually measured against the world’s reserve currency, the U.S. dollar, and that the current price is just over half of the peak price recorded in December 2017, it follows that any currency that doesn’t have the equivalent pattern must, logically speaking, have moved in terms of value relative to the dollar, as well as Bitcoin itself.
To put it another way, it’s clear that there must be issues with the Turkish lira because at the peak price recorded on Dec. 15, 2017, you needed 75,845 lira to buy a whole Bitcoin, or, in USD, around $19,650.
Today, you need 82,012 lira to buy a whole Bitcoin, even though the dollar price is about $10,650 at the time of writing.
This means, you need 8.1% more Lira to buy something which is 45.8% cheaper in dollar terms.
There’s a number of reasons for this, but the main two are probably due to a consistent high inflation rate (16.33% in 2018 and 15.18% in 2019 according to official data collected by macrotrends.net) and loss of confidence in the currency in terms of trading.
The bottom line is that even if you, as a resident in Turkey, had purchased bitcoin at the highest possible price recorded so far in dollar terms, you’d still be better off than if you’d let it sit in cash, and by a huge margin.
If anyone ever tells you that Bitcoin is not a store of value, show them the 84,339,067 people — the entire population of Turkey — who would surely disagree.
But is Turkey the only example?
The list gets bigger
Examining each world currency in turn — or at least all 145 listed as “exchangeable” by Google — reveals more astonishing data:
There are at least five other countries where buying bitcoin at its global all-time high in USD would still have yielded better returns for their citizens than if they’d not acted at all and left their money in the local fiat equivalent.
Those countries are as follows:
The peso has been devalued so much that bitcoin’s (dollar) peak in late 2017 barely registers on the long term chart.
Venezuela’s chart is more complex because it had already replaced its old currency, the bolívar fuerte, in August 2018 due to hyperinflation. The fact that you now need almost 5 billion bolivar to secure a single bitcoin today means that it is quite obvious this currency has also failed.
Holding bitcoin at any time in its history using any of the currencies the country has used in the last few years would have been an excellent way to preserve wealth.
The Sudanese pound has suffered from U.S. sanctions and the secession of South Sudan, which resulted in the loss of most of its oil and foreign exchange resources, but this is of little comfort to the people of Sudan, who would have been far better off putting their money in Bitcoin.
Suriname, the smallest sovereign state in South America, has a population of only 586,632 according to worldmeters.info, and its currency is a little more complicated as it is set at fixed rates at intervals.
Recently, this rate was changed from around 7 USD to 14 USD per Surinamese dollar by the central government, meaning that individual wealth was effectively halved when measured on a global scale.
That latest move ensured that Suriname was now included on this list.
Zambia follows a familiar pattern, with similar reasons for the collapse in purchasing power of the currency linked to inflation and economic issues.
The obvious — and frightening — conclusions
These six countries represent just 4.14% of the world’s currencies in number, so it would be easy to dismiss them as erroneous.
After all, surely we’d be tempted to class these countries as “the usual suspects,” especially if we’re sitting in the comfort of our warm, first-world homes while we do so. Not so easy if you’re in one of these less-fortunate places.
However, it must be remembered that these countries have a combined population of 220,790,628 people compared to a global population of 7,816,446,181, according to today’s data from worldmeters.info. In other words, they account for 2.82% of the entire world’s population.
That is not just a number. These are real people whose wealth has been wiped out or seriously reduced due to no fault of their own. For your own good, I suggest you don’t try the whole “Bitcoin is not a Store of Value” argument with these people. From their perspective it absolutely, undeniably is.
This, to me, emphasizes why Bitcoin is such a game changer on a local and global level because, until recently, none of these people had a viable alternative when their governments went awry.
Even gold, for reasons I have discussed many times, is not a real option for the man on the street. Bitcoin is, even where it was purchased in the period during the only few days in the asset’s history when it wasn’t profitable to do so in most other currencies.
But even that powerful revelation pales into insignificance when compared to what comes next.
This is Way bigger than you think
Continuing the research I started, it became clear that many other countries are very close to appearing on that list as well.
In fact, my self-chosen methodology of selecting the countries that had only found themselves worse off when compared to the very highest bitcoin price possible had necessarily excluded them.
Putting it another way, benchmarking only the worst case scenario had saved them.
What would happen, however, if we were to broaden the terms very slightly? That is, take a look at countries whose currencies have now reached parity in bitcoin terms to that peak in 2017, or are just about to.
Take, for example, Brazil.
In December 2017, you needed 64,642 Brazilian real to buy a whole bitcoin. Today, you need 59,965, even though bitcoin is almost half the dollar price it was then. That’s 92.76% of that total. In fact, on Aug. 7, you needed 64,035, or 99.06% of that amount.
But, of course, we’re comparing it to just those few days where this peak was held. At any other time, therefore, holding Bitcoin would have been a better bet than holding local currency.
But Brazil is not alone. Not by a long shot.
The same results can be seen for the Liberian dollar, Pakistan rupee, Ethiopian birr, Ghanaian cedi, Haitian gourde, Icelandic krona, Kazakhstani tenge, Columbian peso, Namibian dollar, Seychellois rupee, South African rand, Swazi lilangeni (Kingdom of Eswatini), and Uruguayan peso.
That’s another 14 currencies in all, representing another 9.66% of the world’s total by number, and another 732,531,171 people or 9.38% of the world’s population.
Taken together with the others above, it means that 13.8% of the world’s currencies have performed worse than bitcoin (or are just about to) and 953,321,799 people (or 12.20% of the entire population of the planet) would have been able to better preserve their wealth even if they had bought bitcoin at, or very close to, the top in dollar terms.
I don’t know about you, but I found that to be an astonishing statistic. I even had to go back and check it.
Several times, actually.
The power of Wealth Preservation
It should be clear that Bitcoin becomes a very powerful asset for people who find themselves trapped in a currency that is devaluing rapidly for whatever reason.
Effectively, buying Bitcoin puts the devaluation of the wealth of the individual “on hold.” Not only can this wealth be simply transferred out of the country beyond the control of any official body, it can be transferred back at any time, should it be required, for the equivalent value in purchasing terms of the newly devalued currency unit.
For example, if you buy bitcoin (exchange your fiat currency for bitcoin) at the rate of, for example, 100 units for 1 bitcoin and your currency devalues, say, 10 times over, you can simply buy back (exchange your bitcoin for fiat currency) at the “new” equivalent purchasing rate. In this case, that might be 1,000 units of the same currency.
Effectively you’ve used bitcoin as a vehicle to get from one point to another very efficiently without losing any purchasing power at all, even assuming bitcoin itself doesn’t appreciate in value during that time.
Many people have already realized this, and I have little doubt that many more will as well, but perhaps the bigger question raises concerns about where we go from here.
After all, from a standing start, it has only taken eleven years for Bitcoin to become a better store of wealth than nearly 14% of the world’s currencies — and that’s using a measure that is the best case scenario for those currencies. If we were to get really strict, that number is arguably higher.
One thing is for sure, the new all-time high that prompted the research for this article will certainly not be the last for the Turkish lira, Argentine peso, Pakistani rupee and many others.
But how long will it be before we see the same thing with a currency that may be closer to our hearts, especially if we, say, started printing it at unsustainable rates to deal with a global pandemic?
How long indeed.
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Disclosure: The author of this opinion piece has been heavily involved with bitcoin for several years and holds a substantial cryptocurrency portfolio, including bitcoin. He also has a mining operation running the SHA-256 algorithm based in Siberia and is a published author on the subject of promoting the understanding of cryptocurrency. Jason is an analyst at Quantum Economics. This story was first published on Voice.com
Disclaimer: Investing in any asset class is risky. The above should not be taken as financial advice, nor construed as so. Always do your own research before investing or consult with a professional financial planner.