Measures that restrict the free trading of fiat currencies encourage the sale of Bitcoin. An analyst uses data on the Venezuelan economic crisis as an example.

A new analysis suggests that Argentina’s economic problems are the main reason why LocalBitcoins trading volume has increased in recent months.

The author, Matt Ahlborg, published his comments on his webpage (under the title “Will Argentina Be the Next Venezuela?”), presenting this hypothesis based on the increase in the Bitcoin-Argentine pesos (BTC-ARS) trading volume, in its equivalent in US dollars (USD), and how this relationship has behaved in the case of Venezuela. He says that the exchange of BTC for ARS in LocalBitcoins reached all-time highs in April, which coincided with the implementation of new exchange controls that have accelerated this situation since last fall.

The author considers that exchange controls and other economic measures have played an essential role into the increase of trading volume, which reached a first all-time high in early 2018. Since then, it has increased by nearly 200%, currently reaching USD 1.6 million in transactions.

He also highlights that the trading of USD in LocalBitcoins Argentina also rebounded, with a daily volume for January of about USD 20,000. It could have increased from then until now.

Ahlborg explains that people in Venezuela do not use the acquisition of Bitcoin to save the cryptocurrency as an asset, but to access “more stable (fiat) currencies” like the US dollar.” People in Argentina usually conduct exchanges in clandestine spaces known as “cuevas” (caves). Argentines do not need to buy Bitcoin, thanks to an attractive exchange rate of ARS to USD in the informal market.

He believes that this factor adds to two other variables that have had an impact on the increase in BTC trading volume in Argentina. For instance, Venezuelans buy BTC in exchange for ARS and then sell them in exchange for Bolivars (VES) to send remittances by bank transfer. In the author’s opinion, this activity is the reason for a large part of the ARS-BTC trading volume.

The author thinks that Bitcoin-related products, developed by local companies, would gain further momentum if they helped evade exchange controls or create derivatives that have USD-like stability. He cites the initiative of the company Valiu to issue a virtual asset anchored to the US dollar and backed by BTC, in addition to Bitsika’s debit cards or Abra’s investment windows.

Ahlborg states that the growth of Bitcoin trading volume in Argentina will compete with that of Venezuela.  Some variables are the Argentine government’s decision of whether or not to release exchange controls, the closure of clandestine caves, the more user-friendly and accessible products, and services around Bitcoin, and the fact that the USA allows Argentine citizens to use its online services without restrictions.

Furthermore, he believes that the shift towards an open financial ecosystem will have a lot to do with the progress of the currencies of emerging economies. To test this hypothesis, there are very few places to do it, except in Argentina. The best way to make it happen is to buy Bitcoin and US dollars, as he concluded.

By Alexander Salazar

Argentina is the most prominent home to startups that exploit the potential of DeFi. Almost 50% of startups are based in the USA.

A study by Steven Zheng, from The Block, shows that companies from Argentina and Brazil are on the list of 73 new Decentralized Finance (DeFi) startups, most of which (49%) are based in the USA.

Zheng’s research noted that, after the analysis of the legal addresses of these firms, the percentages changed a little for US participants, who went from 50% to 44%. Meanwhile, Singapore, Switzerland, the Cayman Islands, and the British Virgin Islands take a bigger portion of the pie.

In Singapore, home to 10% of the startups tracked for the study, Zheng also found that most of the firms (57%) were founded in 2017. In Latin America, specifically in Brazil and Argentina, there are just 2% of the total DeFi startups considered in the study.

In Argentina, for example, the development of DeFi projects has been giving a lot to talk about in the cryptocurrency ecosystem. Even IOV Labs, the company behind the development of RSK, recently announced a DeFi platform on its Bitcoin sidechain. This project will offer its users a stablecoin collateralized with Bitcoin, leveraged tokens, and staking passive income.

The RIF on Chain (ROC) platform will be built and deployed on the RIF development infrastructure. The Money on Chain team will be in charge of doing the work. This project, which also runs on RSK, will extend its technology to RIF to lay the foundation for a decentralized finance ecosystem backed by RIF tokens.

Money on Chain is a platform that was created in 2019 when it launched DOC (Dollar on Chain), a stablecoin collateralized with Bitcoin. Even though the startup has its project on a global scale, it is mostly formed by an Argentine team. For some time now, it has been part of the large group of projects whose initiatives were born in the South American country.

Another decentralized Marketplace is Ripio Credit Network, which allows funders and debtors to close p2p loan agreements. The Argentine initiative offers microloans to the market in Argentina, Brazil, and Mexico. Founded in Argentina, it is a benchmark platform in Latin America, where more than 63% of people are unbanked.

DeFi Market Becomes Stronger

By encompassing the peripheries of emerging technology and legacy finance, DeFi has rapidly become one of the most prominent offerings in the blockchain ecosystem. It stands as an open world that anyone can access, from any place worldwide, to use and create new products and services.

The movement, which has the potential to completely transform existing financial products, has caught the attention of major business players seeking to capitalize on operational efficiency, cost savings, and disintermediation.

Before the collapse of the stock markets last February, this ecosystem had a value in reserve that amounted to more than USD 1 billion, reaching a new all-time milestone. However, COVID-19 has harmed the sector.

By Alexander Salazar

Bitcoin miners influence the actual supply of coins in circulation. The halving affects miners and leads them to start a bubble.

Since its launch in 2009, the Bitcoin (BTC) network has been adding new units to the economy approximately every ten minutes. That is the average time that it takes for its participants to solve a math puzzle and consolidate a block of transactions. Besides, the community knows that the maximum number of units that this economy will have is 21 million BTC.

Miners are the ones who directly receive the new coins that the Bitcoin network generates, as a reward for their work. However, receiving that reward only indicates that an address belonging to a wallet has a new BTC entry, ready to be spent. In other words, potentially valuable data that the network has recently generated were attributed to someone.

Even though the miners receive the new bitcoins, they only have a potential effect on the market. The coins will come into circulation if the miners move them and exchange them for something, specifically for US dollars, among other currencies. Otherwise, they do not change the monetary dynamics, since they do not belong to the actual supply.

The community could think the same of long-standing holders, that is, those buying cryptocurrencies to save them beyond the low price, with a view to long-term investment. As they only maintain their coins and do not operate with them, Bitcoin’s monetary dynamics do not affect them. However, they make it clear that, instead of 18 million, there have been 14 million BTC in circulation (about 4 million stationary BTC) for more than 5 years.

As for miners, they need to regularly sell the coins that they mine to cover their operation, upgrade and expansion costs. By doing so, they are the ones entering new coins into the economy, going from virtual to physical. They have an impact on the market, expanding the supply of Bitcoin worldwide.

Flow of Coins

In the face of a halving, the logical solution is that miners should stop selling their bitcoins and retain them until they need to trade them to subsist. They could also wait until the price per unit reaches a new higher point that ensures recovering the profitability of the operation.

By following logic, miners are driving Bitcoin’s price by withholding the supply of new coins. Traders take advantage of this event to inflate momentum and create better arbitrage opportunities. First, they cause a bubble and, then, a burst after taking the profits.

As the Bitcoin network issues more coins and the community nears the last actual circulation of all bitcoins, the effect of the halving decreases and it takes longer to feel it.

Only 3 months after the first halving (November 2012), there was an increase by 1,300% increase (from USD 20 to USD 260), and then rise by 600% (from USD 200 to USD 1,200), 60 times in total. At the time, the supply was 10 million BTC issued, and probably half or less in circulation.

The effect of the second halving (July 2016) took much longer (1.5 years) to create a smaller bubble (from USD 650 to USD 20,000), 30 times in total. At the time, the total and actual supply was much higher: 16 million BTC issued and a possible 10 million in circulation.

Given the current supply of 18 million BTC, with around 14 million coins in circulation, the third halving should have a smoother effect, which will take longer to lead to a smaller bubble.

By Alexander Salazar

The network infrastructure BNS will be used to deploy and run blockchain applications. Currently, the Blockchain Service Network has 128 nodes, 76 of which are in China.

Last April 25^th, the Blockchain Service Network (BNS), a blockchain-based industrial alliance based in China for global business operations, was officially launched in Beijing.

The Blockchain Service Network is a cloud system, portal, and cross-cutting framework, jointly built by China Mobile, China UnionPay, and other Chinese companies under the direction of the National Information Center. This government agency seeks to build a global network infrastructure, with which users can deploy and run various applications on the blockchain.

After half a year, BNS ended its internal testing period last April 15^th, 2020. According to its most recent white paper, the global popularization of BNS would turn it into the only global network infrastructure that the Chinese authorities would have innovated. Besides, its entry access will be under the control of China.

The high-end design of the China Blockchain Service Network adopts the structure “1-base, 1-core, 6-cross, 7-nature.” “1-base” is based on a consortium chain architecture; “1-core” is based on supporting smart cities and digital economy; “6-cross” are cross-cloud service, cross-portal, cross-bottom architecture, cross-public network, cross-region, and cross-institutions; and “7-nature” refer to transparency, commonality, scalability, open-source, multiple portals, low cost, and autonomy.

The BNS ecosystem consists of five parts: the cloud service provider, the underlying architecture provider, the portal provider, the developer, the operations and maintenance part. Fostering competition is a key feature of BNS ecology. The operations and maintenance part of BNS will help all users compete in just the same environment so that the entire blockchain industry can actively develop.

A Network with Global Claims

Now the Blockchain Services Network has deployed 128 nodes in cities worldwide, of which 76 are in China, 44 are under construction, and 8 are abroad. In this way, it covers Asia, North America, South America, Africa, and Oceania. Cloud service providers include China Mobile, China Telecom, China Unicom, AWS, Baidu Cloud, and Azure.

The construction project of BNS is huge and requires constant optimization. There is the expectation for iteration to existing every quarter, and the next version update will be in late July. The project will mainly include the launch of Hyperledger Fabric (the national security version), the adoption of Baidu’s XuperChain framework, the consortium chain cross-portal management mechanism, the cross-cutting mechanism of nodes outside the BNS network, the increase and optimization for urban node network management, the use of real-time monitoring, and the optimization of the general operations of the network.

BNS President Shan Zhiguang said that the objective of BNS goal is to become the blockchain Internet. BNS belongs to all the society as it is “not for profit.” It only has a certain cost for the maintenance of the operations of the entire system. The purpose of BNS is to provide that environment and to encourage all the participants to develop new applications.

By Willmen Blanco

The sharp drop in oil prices in recent days contrasted with Bitcoin’s 5% boom. There is much more interest in the upcoming Bitcoin halving than in those of 2012 and 2016.

Bitcoin has recovered from the big drop of last March 12^th and has been particularly promising in recent days. For the first time since that sharp decline, the pioneering cryptocurrency managed to exceed USD 7,500, with an increase of more than 5%. This performance is excellent in the face of the all-time drop in oil futures contracts, which traded negatively between April 20^tht and 21^st.

Due to the effects of global measures to combat COVID-19, oil consumption has reached all-time lows in recent weeks, which has pushed oil storage provisions almost to their limits. This affected oil futures contracts, particularly those of May, whose price fell to negative figures ​​last April 20^th, in the case of West Texas Intermediate (WTI) oil futures contracts, from the USA.

Oil has also shown more volatility in April than Bitcoin. Both the recent all-time drop of oil and the fact that its volatility exceeds that of the main cryptocurrency, an asset considered highly volatile, are points in its favor. Bitcoin’s favorable positioning becomes more important in the vicinity of the halving scheduled for May.

Due to the growth in Bitcoin adoption, there seems to be greater expectation this time about the impact of the reduction of the reward to miners by half, than in the previous halvings of November 2012 and July 2016.

A price increase occurs when miners retain BTC, with a longer waiting period and smaller magnitude of that increase. In the first halving, the subsequent appreciation of BTC was almost two orders of magnitude in two successive rises. In the second halving, the rise occurred a year and a half later, with a lower overall appreciation.

Even with lower expectations for the medium-term performance of Bitcoin, the retention of BTC, before and after the halving, could result in a potential bullish momentum.

Deferred Effect

In another analysis, developer, and blogger Sylvain Saurel states that in the year following the previous halvings (which he calls the N+1 year), there was an increase of 5,800% in 2013 and one by 1,450% in 2017. On the other hand, Saurel draws attention to the fact that in the N+2 year, in the two previous cases of reduction of the reward, there was a strong correction of 58.5% in 2014 and one of 75% in 2018.

Saurel also examined the evolution of Bitcoin’s price during the first 20 days of the year, from 2013 to 2020, but did not find a correlation of these trends with the trend of the respective years. For example, in 2012 and 2016 (when the previous halving occurred), Bitcoin recorded growth by 23% and a fall by 3.5% during the first 20 days of the year, with an annual growth by 156% and 123% respectively.

Saurel highlights that, with a 22% growth in the first 20 days of 2020, the highest growth since 2012 occurred during that period.

There are still about 2,400 blocks to be mined before the next halving occurs, which will take daily BTC production from about 1,800 to 900. This reduction by half is scheduled to decrease Bitcoin’s inflation and maintain its shortage, as Saurel highlights. This represents an advantage for Bitcoin, compared to the printing of “inorganic money” by central banks.

By Willmen Blanco

Central banks buy gold for fear of the economic damage that the pandemic can cause. The pioneering cryptocurrency is breaking with the trend of traditional markets and is becoming stronger.

When the World Health Organization (WHO) decreed a global pandemic on March 11^th, there was immediately a direct impact in all markets. COVID-19 affected all sectors, including cryptocurrencies, securities, banks, and even futures markets. One day after the announcement, Bitcoin fell by more than 40%, breaking the USD 4,000 barrier.

As the pandemic continues, it has caused fear of an imminent global recession. The International Monetary Fund predicted that the health crisis will lead to a historic crisis, not seen since the Great Depression of 1929 to 1939. Along with this, central banks are adopting measures that help understand that they are preparing to face a deep crisis, such as a wave of gold purchases.

Purchasing Gold

The World Gold Council said that central banks worldwide added about 36 tons of gold to their reserves in February. The figure was 33% higher than the purchases that banks made in January. Turkey was the largest gold buyer since it added around 24.8 tons to its deposits in February.

Russia also increased its funds in the precious metal, adding 10.9 tons of gold to its treasury. In September 2019, the amount of gold that it had already stored in its vaults exceeded USD 100 billion. Other major gold buyers during February were Bulgaria (3 tons), Greece (1 ton), Kazakhstan (1.8 tons), and Qatar (1.6 tons).

The past two months suggest that gold is still an important component of foreign reserves, despite the high demand in recent years. However, the World Gold Council noted that the recent instability and uncertainty in the market will be at the forefront of the minds of central banks.

Banks Increase Reserves

In recent days, US banks released their 2020 first-quarter results, showing that their profits have plummeted. Wells Fargo’s first-half dividends sharply fell by 90%, while JPMorgan Chase’s losses reached 70%. Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley also suffered drops in their profits.

Businesses across the USA have closed due to the coronavirus outbreak, which has led millions of US citizens to lose their jobs. Borrowers who were in good shape just a few weeks ago now have financial difficulties and risk not paying their loans. The FED and the US government are taking unprecedented measures to ensure that credit markets can function and to secure funds for households and small businesses.

Several of the largest banks in the USA have set aside billions of US dollars as they expect massive loan default losses. For example, Wells Fargo set aside about USD 3.1 billion to cover expected credit losses during this unprecedented economic crisis.

JPMorgan, one of the country’s largest credit card issuers, increased its reserves as a preventive measure in the face of a wave of possible bad loans. The banking institution reserved around USD 6.8 billion in the first quarter of 2020, with the possibility of increasing the figure in the second quarter.

Bank of America, the second-largest bank in the USA by total assets, recorded a 45% drop in profits of about USD 4 billion in the first quarter of 2020. The loss includes an accumulation of reserves of USD 3.6 billion, mainly due to the deterioration of the economic prospects related to covid-19.

Bitcoin Becomes Stronger

Despite the grim picture that traditional banks show, Bitcoin may represent an alternative to face the imminent world recession caused by the COVID-19 pandemic. A recent study found signs that Bitcoin, besides breaking the trend observed in traditional markets, is also becoming stronger.

The Standard & Poor’s 500 (S&P 500) investment index places Bitcoin among the assets that generate great profits at a high-risk cost, even five times higher. However, the cryptocurrency market only contracted by 5% in 2020 against the collapse of almost 22% of stock indices.

Furthermore, Bitcoin is becoming a less risky asset. The first cryptocurrency is still susceptible to the receding stock market tide, but it is more of a bullish divergent condition. Bitcoin remains close to 9% in 2020 and is nearing its support level of USD 8,000, despite a 20% correlation to the S&P 500.

By Alexander Salazar