Is bitcoin a threat to U.S. dollar? Emerging markets see an explosion of interest in crypto
(Kitco News) New research points to a connection between emerging markets and increased interest in crypto, putting into question comments by some Federal Reserve officials that bitcoin is no threat to the U.S. dollar.
Global stock charting platform TradingView released new data showing that underdeveloped countries are choosing bitcoin as a safe asset.
What might have been gold or U.S. dollar in the past, now it is the crypto world that is offering safety to investors from more unstable regions of the world, TradingView general manager Pierce Crosby told Kitco News.
"What this research had identified for us is that the uptick in interest in emerging markets for cryptocurrencies signifies that there are big questions about the price stability of various fiat currencies, and people are worried about their own financial futures," Crosby said. "What they are doing, as a result, is looking for a natural hedge to those assets that are either unstable or are seeing a lot of potential inflationary headwinds."
This is a really compelling connection that TradingView did not see even six months ago. A lot of it has to do with currency debasement fears that are rising on a global scale.
"When some countries discuss the idea of printing a ton of money, it is basically a detriment to the existing holders of that currency. We see it in the U.S. as well," Crosby said.
But places like Cuba reveal the true extent of it, he noted.
"Cuba is the only country in the world where over half of all inquiries (50.4%) were made about cryptocurrency assets, an increase of 12.2% on last year," TradingView's research said. "Libya (42.2%), Ukraine (41.9%), and Palestinian Territory (38.7%) all feature in the top five, while the Syrian Arab Republic (36.9%) is tenth, suggesting that countries with high levels of instability are proportionally more interested in digital assets than more developed nations."
This indicates that people are worried about their money "being blown away" by either inflationary pressure or general volatility in a given country, Crosby added.
The increase in crypto searches also coincides with what is happening in a particular country at a given time.
"Recently, we saw a lot of activity around Myanmar, which correlates with the fall of a regime. If the military is taking back control of the government, it is a huge threat to the actual currency. People are looking at cryptocurrencies a lot more, and we happen to be the provider of the most robust data," he said.
TradingView is not a brokerage firm. It is a provider of crypto-asset prices across the world. Crosby said the surge in bitcoin this year has contributed to TradingView becoming the 83rd most popular website globally.
"People are finding ways to invest, and we are just the best way for them to track that investment," he noted.
When asked why investors from underdeveloped nations are not as interested in traditional assets like gold or the U.S. dollar, Crosby said that "you can't beat the Internet."
"Broadly speaking, this idea has started to take hold in a lot of countries. Cryptocurrencies may be a better way for folks to hold some of their money over time. This is definitely something that we will see more of," he stated.
This research comes as more Fed officials are starting to talk about bitcoin. In the latest comments, St. Louis Federal Reserve President James Bullard said that bitcoin is not a threat to the U.S. dollar's global currency reserve status.
"I just think for Fed policy, it's going to be a dollar economy as far as the eye can see — a dollar global economy really as far as the eye can see — and whether the gold price goes up or down, or the bitcoin price goes up or down, doesn't really affect that," Bullard told CNBC.
Bullard added that currency competition is nothing new for the U.S. dollar. The euro and the Japanese yen are both solid currencies, but "neither of those is going to replace the dollar," he said. "It'd be very hard to get a private currency that's really more like gold to play that role, so I don't think we're going to see any changes in the future."
This comes at a time when bitcoin hit a new record high of above $50,000 as more institutional and retail investors embrace the cryptocurrency as a way to diversify their portfolios against currency debasement fears in light of the massive money-printing going on across the globe.
The latest move up was supported by companies like Mastercard and BNY Mellon moving into the crypto market.
Last week, Tesla announced that it bought $1.5 billion worth of bitcoin and was planning to accept the cryptocurrency as payment for its products.