Why Fragile National Currencies Are Bullish For Bitcoin

By Lamium on Altcoin Academy

Published in

The Capital

3 min readSep 23, 2019

Weakening emerging market currencies have been a distinctive trend recently as global trade war worries are about to disrupt the long-continued bullish sentiment. During times of looming recession, investors usually re-allocate into perceived “safe-haven assets”, like gold or bitcoin. The weakening national currencies will most likely benefit bitcoin investors & users. Here’s why.

Emerging Markets Sell-Off

Amid the escalating trade war tensions, the global FX market saw a sell-off for many emerging market national currencies. Emerging market countries are by default the first ones to suffer as paradigms turn to negative.

Russian Rouble (RUB) dropped deeply against USD during August-September 2019. The RUB weakness is an indicator for Russian economy holistically as the country’s export industry is built on raw materials (oil, gas), and weapons to a smaller extent. Making Russia particularly vulnerable to volatility within said markets.

Russia has traditionally been a location for strong bitcoin growth, especially within OTC (over the counter) market. The popularity of OTC transactions stems partially from the lack of proper Russian exchanges. Consequently, by 2018 data, Russia was the biggest sovereign market for LocalBitcoins.

Topping at 1,7B rubles during peak demand of late Q4 2017, the weekly OTC volume consistently stayed on the verge and above 1 billion RUB. While a developing and rich with raw materials and talent, Russia copes with challenges within local politics and corruption. With a population of 145 million people, Russia also represents a huge market for bitcoin adoption.

Weakening Emerging Markets Uplift BTC & USD

There has been a lot of talk about USD losing its global reserve currency status, however, the current trend of weakening EM fiats seems to oppose it. The increasingly weak national currencies strengthen the US dollar as the masses look for safe havens. In summary, the liquidity flows into USD.

Weak national currencies also boost bitcoin as an alternative asset. The price of 1 bitcoin (BTC) in Argentinian peso (ARS) has been skyrocketing lately. We’re expecting the weak national currencies to boost bitcoin demand in a long-term perspective.

Argentina In Trouble (Again)

Argentina has a history of failed governmental & monetary politics, suffering great depressions during 1974–1990 and 1998–2002. Argentina is a prime example of growing bitcoin adoption in a low-trust environment. By LocalBitcoins data, the OTC volume has been steadily growing within the last years.

Argentine peso (ARS) collapsed 30,3% to record 65 per USD on August 12th, after market-friendly President Mauricio Macri’s worse-than-expected performance in the country’s primary election. As the stock market tanked globally during the same timeframe, there was also speculation about emerging markets meltdown.