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Bitcoin to End 2018 “Explosively” on Emerging Market Recovery

Bitcoin is finally back above $7,000 and it might now end the year “explosively higher” according to one expert.

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In an interview with CNBC, Thomas Lee of Fundstrat Global Advisors has highlighted an “important correlation” between emerging markets and bitcoin.

“Emerging markets actually rallied into the end of the year and we had a huge bitcoin rally, and as emerging markets have since fallen we have seen bitcoin fall sharply.”

The principal reason why bitcoin and risky assets like emerging market currencies and equities are correlated is what Lee calls the “wealth effect.”

“Wealth effect means if you’re living in an emerging market and you see your stock market fall hugely it simply means you have a lot less money to buy bitcoin.”

Of course, Lee’s reason for emerging market correlation only makes sense (it could be said of any market declines, not only EM) once readers understand that bitcoin trading volumes are increasing fastest in emerging markets, including the Philippines, Mexico, Turkey and Nigeria. In particular, countries whose national currencies have spiraled downwards are seeing rapid bitcoin acceptance.

Consider also that while bitcoin has certainly been in a bear market in 2018, in EM currency terms it’s far nearer to its 2017 highs.

In dollar terms, bitcoin’s Wednesday afternoon price of $7,109 is roughly 20 percent higher than August’s lows, but in Turkish lira terms, it’s now 70 percent higher. In dollar terms, bitcoin is down 63 percent since an opening price of $19,175 on December 18th; in lira terms, the fall is only 38 percent. Higher crypto prices in emerging markets fuel local interest.

With this in mind, should there be a recovery in emerging markets, Fundstrat’s Lee believes that bitcoin “could end the year explosively higher.”

 

 

Further Reading

 

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Currency rates were extremely volatile last week as the coronavirus situation worsened day by day with various countries implementing ever-tougher measures to stop the spread of the disease.

Last update: 23 Mar, 2020

Coronavirus spread fears linger – USD strong – AUD at 11 year lows

This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.

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Coronavirus unnerves currency markets

The strong start to the year for “risk-on” currencies is already a distant memory.

Posted: 3 Feb, 2020

  

Posted to: News

 
 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

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