Over the last several months various cryptocurrencies have been left for dead. Everything from Bitcoin to Ethereum or various types of ICOs have lost substantial part of their values, some down more than 50%. This has made various parties question the future and viability of cryptocurrencies.
One aspect of cryptocurrencies that has been touted as one of their advantages is that there is finite amount of various “Coins”, and there is no central bank of any kind that print more of them. In essence, being used as reserve, in the shape gold has historically been used. For example, the total amount of Bitcoins that can be “mined” stands at 21m coins, and currently we are just a couple million from that level.
It might appear that cryptocurrencies finally are showing their true utility. This being in various emerging markets with more or less stable government, fiscal and monetary policies.
Source: Bloomberg, IFF
As can be seen above, over the last month, whilst there has been a total carnage in various emerging markets currencies such as Brazilian Real (BRL), Argentine Peso (ARS), Mexican Peso (MXN), South African Rand (ZAR), Turkish Lira (TRY) and Russian Ruble (RUB), the most used cryptocurrencies such as Bitcoin (BTC), Ripple (XRP), Ethereum (ETH) or Litecoin (LTC) are all fairing much better.
This point towards that even though cryptocurrencies are in the infancies of their lives, in time of turmoil and stress, they tend to fair much better than various fiat currencies, especially those of emerging markets.
The most extreme example is in Venezuela where the the currency Bolivar, lost around 99.9% of its value and people are in despair as the economy plummets. As The Economist point out – Bitcoin has in effect become a currency Venezuelans use.
“On localbitcoins.com, a site that allows the crytocurrency to be exchanged for local currencies worldwide, Venezuela trades more bitcoin than China.”
Source: The Economist
If the emerging markets turmoil becomes more severe, it might be a good time to have closer look at various cryptocurrencies and how they behave as they might be a potential “safe haven” until things stabilize.