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[Ko Ran] Crisis-resistant dollar, and bitcoin

Since 2010, the search for bitcoins has intensified. According to Coin Telegraph, a new outlet dedicated to cryptocurrency, trades of the virtual currency in Chile hit a record high recently amid the spread of the novel coronavirus. According to the media outlet, trades of bitcoin as of April 4 reached 330 million Chilean pesos, which translates to approximately 475 million won. Trade volume at Cryptomarket, a mainstream cryptocurrency exchange in Chile, also rose rapidly. Daily trade volume rose by 270 percent compared to March 30. The situation is similar in Argentina as well. Currently, Argentina is in negotiations with creditors in the United States and Europe as well as with International Monetary Fund regarding its $65 billion debt. Argentina’s state government is requesting to downsize the debt volume as well as to extend the maturity date by three years. According to Arkane Research, a cryptocurrency analysis firm, trade between bitcoin and Argentinian peso rose by 1028 percent recently compared to January 2018. Coin Telegraph said the latest incident was influenced by the Argentinian government’s risk of default and inflation in its local currency. #Lebanon sees rise in bitcoin value When local currencies face volatility, it is common sense to purchase U.S. dollars. But in reality, that might not be as easy as it seems. Lebanon on March 7 announced a moratorium on debt payments of $1.2 billion in Eurobonds. Two weeks later, the Lebanese government said it will suspend debt payments of its Eurobonds going into a de facto default stance. The country is on the verge of going bankrupt. As the state economy is at standstill, demand for bitcoin has risen. As expected, trading of bitcoin in Lebanon is being rolled out with huge premium. According to Localbitcoins, a virtual currency exchange, five bids have been placed on bitcoin at between 18.15 million and 23.42 million Lebanese pounds. In U.S. dollars, that translates to $12,000 and $13,500. The bidding price for the same currency on CoinMarketCap, a U.S.-based exchange, was set at $7,700, meaning bitcoin in Lebanon is being traded at 55 percent to 75 percent higher than global market price. #So why are people buying bitcoin instead of safe asset U.S. dollars? Trading of U.S. dollars is affected by countries’ physical borders. For example, three times the of Lebanese who live inside their home country are living elsewhere. If those who live outside Lebanon want to send U.S. dollars to their home country, they need to use the bank system, which will incur losses based on the official exchange rate at banks and market rate. Bitcoin, however, eliminates those physical boundaries. They don’t have to use the bank system but those who are involved in the trading can directly send and receive currency through a peer-to-peer system. Even if the state government or bank institutions intervene to take taxes out of the trades, the rate for bitcoin is trivial.

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