Nearly four months ago, when bitcoin was still languishing in the low $200s, we explained why in the post-Yuan devaluation regime, where all Chinese capital outflows are now scrutizined through a microscope, bitcoin will inevitably see substantial appreciation as the local population scrambles to transfer funds out of China and into more traditional end markets, such as the US, Canada and western Europe, using such still largely unregulated mediums as bitcoin and other digital currencies.
Why not gold?
This is what we said in the beginning of September: "China's propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households. However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation - it tends to show up quite distinctly on X-rays."
Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits.
Two months after we wrote this, bitcoin more than doubled to $500 before retracing some of its recent gains, and has resumed its rise again.
Why? This time the answer is Argentina, where as we reported two days ago, the new president admitted that "there are no more dollars in rhe central bank" which means that the days of the country's capital controls are numbered, and because as Citi said president-elect Macri wants to unify the official and parallel exchange rates (~9.60 and 15.50 ARS/USD, respectively) that will entail a substantial devaluation. Just how overvalued is the peso, you ask? "Grossly."
In other words, another major currency collapse is in store for Argentina, its fourth major one in recent decades.
It also means that as yet another country is about to take currency warfare to the next level, bitcoin is posed for another sharp move higher (even as Chinese demand for the fiat alternative continues to grow).
And since the topic is Argentina's upcoming latest currency collapse, courtesy of Raoul Pal's RealVision, here is an interview by Dan Morehead, Ex-Head of Macro Trading at Tiger Management and now CEO of Bitcoin investment firm Pantera with Wences Casares, an Argentinian Founder of Xapo and one of the pioneers of bitcoin.
Wences, an Argentinian, has seen his family's wealth evaporate not once, not twice but three times due to hyperinflation, devalulation and confiscation and that has led him to bitcoin. His driving philosophy: "There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency."
More from the person who knows all about currency destruction in the excerpt below...
... and as usual, the full interview can be seen on the RealVision website (which boasts dozens of other interviews with financial luminaries) and where a bitcoin subscription discount is available.