Cryptocurrencies: isolation and the economic crisis increased their demand

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The quarantine caused by the advance of Covid-19 increased the demand for cryptocurrencies (virtual money), mainly bitcoin, due to a confluence of factors both in Argentina and in the rest of the world.

Cryptocurrency is a token Secure digital encryption used to exchange products and services, especially in the virtual world, but increasingly in the real world.

It is estimated that there are three to five thousand cryptocurrencies in the world.

The best known are bitcoin, ethereum, binance coin (BNB) and litecoin (LCT), to which are added stable cryptocurrencies such as tether, whose unit is always worth a dollar.

A recent study by consulting firm Arcane Research warned that weekly purchases in Argentina of LocalBitcoins (bitcoin in pesos) increased 139 percent in dollars between January 2018 and last April, when there were weeks that exceeded 450 thousand dollars.

According to local market data, LocalBitcoins have been breaking records for five months: in December there were weeks that registered purchases of 32 million pesos, in March they exceeded 34 million pesos and last month there were weeks that exceeded the barrier of 45 million pesos.

To this is added that in recent months large global cryptocurrency operators, such as the Mexican, landed in the country Bitso, the Chinese Huobi and the Chinese-Japanese Binance.

It is that to this tendency particular situations linked to isolation were added.

“Buying bitcoin is a way to escape capital controls. Via bank transfers or cash, from ABC1 clients with surpluses to dependent employees who are buying,” explains Manuel Beaudroit, a partner at Bitex.

This company, dedicated to professional and commercial operations abroad through bitcoin, saw a significant increase in consultations from the second week of quarantine in the country.

For Antonella Perrone, CFO of Xcapit, the social isolation scheme added another factor that fueled demand.

“Many people began to find out to send money abroad because they have children or relatives who were stranded, since it is cheaper than the traditional channel,” he said.

Your company based in Córdoba is dedicated to generating bots (virtual robots) that automate investment in cryptocurrencies. Since March 1, managed capital has increased 300 percent in dollars and 88 percent in the amount of funds.

Investment channel

Bitcoin is a volatile currency when it comes to price, in part because it lacks maturity. But the price movement it had in the past 12 months also gave it a boost.

From the end of last year until February, its value rose to $ 10,000. Then it fell violently to touch $ 4,800 in March, and that caught the attention of investors, who when seeing it “cheap” began to buy, which raised its price above $ 8,600 again. In the country, as the official price does not follow, its price ranges one million pesos.

According to Beaudroit, to this is added a technological event that will take place on May 12 next: the halving. Every four years, the amount of bitcoin that can be generated by “miners” (bitcoin producers) every 10 minutes is halved – it will go from 12.5 percent of what could be done initially to 6.25 percent -, which caused a reduction in supply.

“In recent weeks, we have received inquiries from traditional banks and technology companies to add cryptocurrencies to their investment portfolios. Investors see the stock markets of the world fall due to the global recession and that most countries go to the monetary issue, which can generate devaluation of the physical currencies. People lost their fear of virtual currencies and that generates more interest not only in Argentina, this happens throughout the world ”, explains Perrone.

Instead of bonds?

A study last year by the international consulting firm Statista indicates that, of the 10 countries with the most users of cryptocurrencies, five are Latin American, and that Argentina is in fourth place with 16 percent.

“The lack of trust in governments and the problems in sending remittances abroad are problems of the entire region. That makes the use of cryptocurrencies common, ”explains Perrone.

That is why, from the technological world, it began to be argued that, in crisis situations, instead of bonds, a province can issue cryptocurrencies, which are generated through secure technologies such as Blockchain.

“A province can generate cryptocurrencies against an asset, for example, taxes owed, and with that it can pay its suppliers, creating a liability in virtual units that can be atomized into thousands of units, and with that people could pay taxes or buy in the local market ”, explains Martín Carranza Torres, director of Carranza Torres & Asociados, a legal firm specialized in computer law.

According to the specialist, for the provincial administrations, this alternative is not very attractive because it is a system “perfectly transparent and under everyone’s control, and in this no province wants to be the first”.

Carranza Torres relativizes the two great questions with which they target cryptocurrencies: the volatility of its price and the possibility of fraud.

“The volatility bitcoin has is not applicable to ethereum or tether, which are stable. And, as for the known scams, these were produced by platforms that manage bitcoin and that kept the keys, but, currently, there are companies that are dedicated to keeping the key, which makes it as safe as any traditional system ”, he explains.



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