External factors influencing crypto adoption



Crypto Inferno



Back in 2013, bitcoin got a boost when Cyprus started ‘bailing in’ its banks – taking money directly from account holders to pay their debts. A way to store value beyond the reach of governments suddenly became quite appealing. The same happened a couple of years later when China started imposing capital controls. But that has not been the case for the last year or so, as the dynamic is changing. What kind of geopolitical factors might drive crypto adoption now?

With greater adoption, bitcoin is no longer uncorrelated from the mainstream markets and traditional asset classes. Once the case, this dynamic reduced with growing interest from institutional and large investors. Bitcoin now more closely follows other market cycles. It no longer acts like ‘digital gold’, as a kind of alternative safe-haven asset that some investors move money to when there is turmoil on the markets.

Is crypto now immune to economic misery elsewhere? The case of Venezuela suggests that’s not quite so.

Venezuela’s economy is a basket case, with a currency plummeting in value, vast debts and harsh US sanctions. President Nicolas Maduro announced the Petro, Venezuela’s blockchain currency, back in December – explicitly stating it was a way to sidestep the sanctions. Petros are supposedly backed by the country’s oil reserves. Maduro claims that the pre-sale raised over $3 billion in Russian roubles, BTC, ETH and NEM (the blockchain on which it was launched), but the opposition-backed National Assembly has declared it illegal.

A dictator, using crypto to raise money when the international community puts the squeeze on him. We also have North Korea hacking the South, amongst other countries, and raising money in the form of bitcoins from various illegal sources. Doubtless these won’t be the only two examples.

The demand for bitcoin is there, and it’s still linked to economic trouble – just not in the way it used to be.

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