Demand for cryptocurrencies in certain countries is growing given the COVID-19 pandemic. Bitcoin (BTC) peer-to-peer trading volumes in Argentina, Chile, Venezuela and Morocco have peaked and reached new highs in the past few weeks.
Additional reports indicate that traffic on centralized exchanges has also peaked in recent weeks, while major trading platforms such as Kraken and Coinbase have started hiring due to increased customer interest. So Why exactly do people trade more cryptocurrencies during the global shutdown and where is this trend most evident?
COVID-19 triggered a massive sale
Like perhaps any other industry out there, the cryptocurrency market is affected by the pandemic. However, the impact of the virus on the sector is not entirely negative. While the price of Bitcoin has dropped since March has recovered to the level before the crash. In a financial crisis, it is typical that some assets go up and down for a short time, as Jeff Dorman, chief investment officer of cryptocurrency investment management company Arca, told Cointelegraph:
“In the first few weeks of a financial crisis, be it due to liquidity or solvency, Investors generally hurry to sell anything they don’t really believe in. In the following weeks everything you believe in will be bought. The rest of the time he sits and waits for his decisions to be made and clarity to be improved. “
In addition, the virus has paradoxically opened up more opportunities for cryptocurrency companies like the US-based Kraken exchange, which recently created 100 additional jobs due to the obviously high level of customer interest. “”The traditional system seems to be breaking down all over the world“said Jesse Powell, co-founder and CEO of Kraken:”For us, increased customer demand means increased business and attitudes.“”
San Francisco-based Coinbase employs dozens of people in its offices in the United States, Europe, and Asia. The company is apparently “in full swing” and is implementing its strategy for 2020 despite the looming economic crisis, as announced last month by the company’s CEO, Brian Armstrong. According to Armstrong, whose company allegedly saw hUp to $ 1.3 billion in fiat currencies and cryptocurrencies deposited into your wallets in a single day during the March market crashCryptocurrencies could be the key component of a financial system according to COVID-19.
But not only that Coinbase arrived in huge quantities on March 12, the day the price of Bitcoin fell nearly 50% during the event that has been dubbed since then. “Black Thursday“from the community. During peak sales, Bitfinex processed up to $ 11.8 million per minuteAccording to a press release, the company sent to Cointelegraph. Kim Grauer, head of research at Blockchain and cryptocurrency analysis company Chainalysis, agreed with the sentiment and told Cointelegraph: “Cryptocurrency exchanges saw their biggest bitcoin inflows“and adds:
“”9 times the average daily amount of Bitcoin was sent to exchanges to be sold from March 12th to 13th. This selling pressure led to a price drop of ~ 37%. Price pressures have eased since then. “
According to the chointalysis data provided to Cointelegraph, all chain activity was spread across all assets in the week of March 15th totaled $ 44,000 million, although volume normalized in April. Trading volumes on the exchanges reached a “multi-year high” during the first sale as the drop in prices boosted activity, John Todaro, Chief Research Officer at TradeBlock, confirmed in an email conversation with Cointelegraph:
“”This was seen as the trading table for US investment banks in all markets. saw some of the highest volumes in years. Trading activity on the stock exchanges has declined slightly since the beginning of March as prices have stabilized. “
Dollarization is one of the current trends
Stable coins are a particularly popular type of asset these days, Todaro told Cointelegraph: “One area within the digital currency markets where trading volume has increased is stable coins, which have probably been in high demand as they effectively offered equivalent USD exposure.“”
“”We have seen a trend towards stable coins in recent months“Grauer confirmed that despite all recent criticism of the Federal Reserve’s money pressure, the US dollar is still considered more reliable than Bitcoin:
“”We believe the stability of the USD is attractive and is seen as a more stable investment. In our view, if we see a systematic step towards Bitcoin in uncertain times, this would be further evidence that this is also viewed as reliable value protection or at least more reliably as available alternatives. “
If anything, the US dollar has become even more popular, Jack Purdy, analyst at cryptocurrency research firm Messari, told Cointelegraph: “The biggest trend was the dollarization we saw in traditional markets, and it found its way into cryptocurrencies. “
Developing and crisis countries may be more dependent on cryptocurrencies
But, Do people really exchange more cryptocurrencies during quarantine? This could be the case in some countries, such as Russia, where cryptocurrency exchange traffic increased 5.56% in the last week of March compared to the February average. Remarkable The increase in traffic numbers coincided with Russia’s first week of unpaid work, which was planned from March 28 to April 5 to mitigate the outbreak of the coronavirus.
However, there doesn’t seem to be any data on centralized exchanges in other countries, so it is practically impossible to confirm the trend. The data mentioned by Coinbase and other exchanges seem to indicate that people acted actively because of falling prices on Black Thursday, not because of the outbreak of the corona virus.
The situation appears to be different in developing countries. Figures from LocalBitcoins, a popular peer-to-peer Bitcoin trading platform, seem to indicate that Bitcoin’s trading volume has recently hit a record high in countries like Argentina, Morocco, and Venezuela.
In particular, the volume of local bitcoins in Chile a new record of more than 330 million Chilean pesos a week that ended on April 4while in Argentina the weekly volume of Bitcoin was bought in local currency 1,028% have skyrocketed since January 2018. Venezuela has also just set a new weekly bitcoin volume record there In the week that ended April 25, there were more than 722 billion Venezuelan bolivars. But not only in Latin America, since Bitcoin also trades peer-to-peer in Morocco It reached a record volume in early April.
All of these countries have one thing in common: unstable or challenging economies. Venezuela is experiencing political and economic instabilityand the country’s leader, Nicolás Maduro, does not appear to have introduced a national cryptocurrency. Argentina faces a possible default of $ 65 billion in external debt, while Chile, despite being one of the richest countries in the South America region, is experiencing an economic slowdown due to a blockade. Finally, the Moroccan economy is expected will lose $ 2.89 billion in the first half of 2020 due to a pandemic. Todaro believes that people in some countries use digital currencies for a reason:
“”In countries with political instability, a global pandemic like that of COVID-19 could have significant lasting effects. Perhaps it could stimulate changes in local and national governments“”
In fact, Bitcoin’s safe haven narrative worked best in countries like Venezuela, where the local currency depreciates so quickly that people are forced to issue their paychecks on the same day they receive them – otherwise they simply lose you the opportunity to buy enough food. Bitcoin, on the other hand, is proving to be much more stable despite its notorious volatility. Even if the price drops, it will hardly be as dramatic as the 10,000,000% inflation rate that Venezuela had to endure last year.or.
“”In countries with political instability (some in Latin America, Africa and others), acceptance of Bitcoin and digital currencies in general appears to be growing“Todaro said to Cointelegraph. However, Grauer has not yet reached a specific conclusion. In your opinion, LocalBitcoins data may not be enough to prove a point:
“There are certainly other interesting trends worth investigating in the LocalBitcoins trading data, but before we can draw any conclusions as to whether people are systematically accessing cryptocurrencies in uncertain times, we first need to look at all the data together. We are working in the next few months on our own analysis. “
In fact, it should be noted that LocalBitcoins data only shows the volume of bitcoin trading, while stable dollar-fixed coins should be particularly valuable in developing countries, as mentioned above. On the other hand, trading cryptocurrencies online in countries like Venezuela where local exchanges trading Bitcoin, Ether (ETH) and other popular cryptocurrencies and stablecoins almost don’t exist.
Related: The President of Venezuela, Nicolás Maduro, is not for cryptocurrencies, he only likes Petro
In any case, cryptocurrencies are popular
Even regardless of the trading volume, cryptocurrencies have remained a popular concept during the COVID 19 outbreak, according to financial analysis and management company The Tie. “”Since the beginning of the year, the average volume of Bitcoin tweets has increased by 16.5% in 30 days“The company’s CEO, Joshua Frank, told Cointelegraph.
Although the number of Bitcoin conversations on Twitter decreased after Black Thursday, according to Frank, it has accelerated due to the next halving. Consequently “Bitcoin sentiment is approaching the highest level we’ve seen in 2020“”