You’ll find a lot of bitcoin price predicitng gold if you drill down on this statement a bit more:
This in turn creates additional foreign buying and demand for Bitcoin as a forex hedge, particularly outside the US, because the price of Bitcoin in that country is rising quickly.
Bitcoin volatility makes it a lousy forex hedge for consumers and businesses in the developing world. Talk to clients of the active bitcoin exchanges in Africa or South America and you’ll find two types: 1. bitcoin speculators whose motives and trading is similar to bitcoin speculators in the developed world and 2. people looking for a safe haven for their wealth using BTC as a conduit to USD.
On the other side of those BTC buys are local miners and arbitrage players who are buying BTC on developed world exchanges and selling at a premium after transferring the BTC from Coinbase or Uphold to the developing world exchange or (in most countries) selling on LocalBitcoins.
Developing World BTC speculators will put upward pressure on BTC price in both developing world and developed world BTC markets.
But the second group — the ones I refer to as wealth preservers or capital exporters — will exert downward pressure on BTC price in the developing world. Why? Becuase not all the coin they are buying locally is purchased in the developed world but 100% of the coin they sell for USD is. This cohort doesn’t want to escape the frying pan of Real or Peso or Bolivar devaluation only to fall into the fire of a massive BTC price decline. They want stable USD.
I’m not a trader, but seems to me that there’s a smart trade that looks at currency devaluation in countries with cheap electricity = local mining operations = local BTC to sell = no upward pressure in developed world from buyers) and the same scenario in countries without cheap electricity = upward pressure on BTC price in the developing world.
Then there’s AirTM — a company I founded with two supersmart young entrepreneurs from Mexico City who know from currency devaluation — that serves the second use-case (wealth preservation), as well as many others (e.g. making and receiving USD payments, USD remittance, connecting Paypal and other e-money networks to local bank networks where Paypal isn’t connected directly). AirTM’s P2P network is active in 62 countries — a Localbitcoins for USD. AirTM provides the second group with a way to preserve wealth in USD without having to buy BTC locally and sell it abroad in order to hold USD. As you point out, most consumers aren’t (and probably never will be) interested in bitcoin, as cool as it is, just as most people aren’t interested in learning esperanto — it’s too exotic, strange, complicated, scary and they really just want to not watch their hard-earned wages disappear due to currency devaluation.
Instead of capital flight, which is what China and most other countries cracking down on BTC object to, AirTM empowers developiong world consumers and businesses to hedge against local currency devaluation with a USD account that is P2P connected to the local bank network, enabling local currency withdrawals at any time.
As you probably know, Tether does something similar for people already holding BTC (or other cryptos or altcoins — check out Poloniex), serving as a safe-haven from volatiliy for crypto traders and also arbitragers looking for a stable shuttle between crypto exchanges.
The growth of AirTM (projected to process $50MM in transactions in 2017) is good news for BTC price globally because it removes the downward price pressure of sellers looking to get out of BTC and into USD, while maintaining the upward pressure on BTC price from local coin buys on local exchanges. AirTM cashiers generate a lot of BTC trading volume on local exchanges in Venezuela, Brazil, Argentina, etc., but they are probably net neutral on price becuase the cashiers buy BTC locally to convert into AirTM USD to process AirTM deposits and sell BTC locally to process AirTM withdrawals.
My point here is that to the extent that BTC serves the wealth preservation/capital flight use-case in the developing world using legacy rails (local currency bank transfer =>local BTC exchange buy order=>BTC transfer=> foreign BTC exchange sell order=>USD) it will have a net negative impact on BTC price.
As AirTM grows, that negative pressure on BTC price from this use-case will be removed.
As I’ve written elsewhere I believe that providing billions of consumers and businesses in the developing world with stable money they can rely on (USD for the foreseeable future) in a digital account connected to every other bank and e-money network is the biggest near-term opportunity in fintech.
I’m also confident that developing world regulators will prefer USD hedging tools like AirTM that puts capital outside but Internet proximate to the local money system, rather than parking it on the ledger of a foreign bank.
Finally, I suspect (but again, no BTC trader I) that this will have a very positive impact on BTC price over the coming months, an impact that will correlate to local currency devaluation in countries with active bitcoin markets but without cheap electricity.
This comment was a lot longer than I thought it would be when I started writing it.
