How Many People are Truly Using Crypto to Avoid Capital Controls?

in #bitcoin7 years ago

There has always been the claim around bitcoin specifically that many have been using it to avoid capital controls in places with strict governments that either A, restrict your from exchanging your currency into another freely, or B, severely limit the amount of money you can actually transfer and transact with. I have had heard many conflicting statements from many different people over the years and I think it is time we evaluate this claim. I want to see what amount of people are actually using crypto for capital controls versus those mostly just speculating on the price increases.

Once bitcoin had started gaining value in the 2011-2012 period, many people started to bring up the idea of using bitcoin as a mechanism to avoid capital controls or even to avoid inflation, but after the bubble up to 10 dollars and the large drop afterwards, it was clear that in order for this to work, the price would have to continuously move up or stay much less volatile in its movement. At that point in time it wasn’t clear if bitcoin was going to survive long term and many believed that in order to have real utility, we would need to get to a higher price point. It took a few years , but the 2013 European Union Crises was where people started to actually talk about real people using bitcoin to avoid capital controls.

Cyprus initiated a bail-in to pay for debts and everyone panicked overnight. Banks were shut down, ATM withdrawals were limited and had massive lines. No one had access to their money, but people like Max Keiser were claiming that many people were using bitcoin to get past these controls. This started the bubble of 2013 that skyrocketed bitcoin to massive highs. However in reality many people on the ground in Cyprus were saying it was untrue and the localbitcoins volume seems to back that up. People had no access to money to actually buy bitcoin and those who might have, flew to other countries and accessed their accounts. In hindsight it seems that we were probably wrong.

The same idea emerged in China after devaluation of the RMB that people were buying bitcoin to thwart capital controls, which is actually half true. People in China were and continue to buy massive amounts of bitcoin, but the reason isn’t capital controls for the most part. The people who I have talked to in China and on the ground say that people are mostly treating bitcoin like a stock. They arent using it as a transitory mechanism to move money out. They are buying it holding it for a price rise and sometimes selling it. To them it is just seen as an alternative security, like it is to many other people in countries like the United States.

I think overall the majority of the price is and will most likely always be due to speculation and the use as a store of value. There are some people using it to thwart capital controls, but in many cases you have to be so rich to do so that many other options are already available to you. I will say that I think there are some countries where people are using it as a store of value, but again they are mostly staying within their own currency while doing so or speculating that the price will move up in the future. We are still at a point where bitcoin is small enough and volatile enough to scare off a large amount of people. In order for any cryptocurrency to be a real utility in terms of capital control aversion, we need to reach a marketcap level where a group of people cant hurt the price in an afternoon. We also need liquidity on much higher levels so quick movements can be easily done.

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Agreed with your conclusions.

"I will say that I think there are some countries where people are using it as a store of value"

Venezuela comes immediately to mind. Any economy under severe monetary distress can deal with even ruthless volatility, as long as sometimes that volatility is to the upside. It sure beats holding expensive toilet paper or oven fuel.

You bring up a great point. I wonder how long it will take for bitcoin to reach that marketcap.

Yes I guess most people hold it like stocks and speculate on it. However I feel Bitcoin is turning into a real store of value but most alt coins are in a speculative Bubble. I believe only in Bitcoin and Steem for now. They don't make you 10x gains but you can sleep peacefully at night knowing they won't fall by 10x the next day you wake up

Yeah i completely think bitcoin is being used as a store of value, but avoiding capital controls are a bit different. It is happening a bit but I think not yet on a mass scale. I definitely see it working on a mass scale in the future.

"Avoiding capital controls" sounds like exactly where the regulators are going to lay down their nails and rails. Dumb-ass rich folks may very well screw this whole thing up for everyone.

Too volatile to be considered store of value. Secondly, many people see only solid = material; using something so 'imaginary' might be a huge limit.

Followed/upvoted/appreciated. Love this post. Very well written. Very well articulated. Agree completely.

Anecdotally, I'm hoping to use it as a means to get my money OUT of China, which is never easy...

Ohhhh ugh I wouldnt say that to much. Better hurry up though before Grassleys dumb bill comes up for vote if it hasnt already.

If you are being watched, just type "Rutabega". We'll get an agent out there asap.

@calaber24p thank you for sharing this.
Will you share the approximation of the marketcap needed?

we need to reach a marketcap level where a group of people cant hurt the price in an afternoon. We also need liquidity on much higher levels so quick movements can be easily done.

No one really knows. I mean it might end up coming down to a better distribution than a specific market cap. I would say anything that doesnt move more than 2.5% daily would be ideal. I pulled that number from my ass by the way.

Yes, I know - which is why I asked for an approximation.
I often think that the current worldwide capital flows transacted have a hidden surprise that only a few are privy to.

The massive capital flow into FINTECH signals the urgency, and will cryptocurrencies be accepted by the populous before the hidden surprise - is it literally a race for (market?) events?

I think market cap is a bit overemphasized because of how thin the crypto trading markets are. It's tough to say what Eth's real market cap is after seeing that flash crash, for example.

Just a thought, I'm sorry I can't estimate an answer to your question.

Thanks, I want people prepared for the market correction(s) coming...

In order for any cryptocurrency to be a real utility in terms of capital control aversion, we need to reach a marketcap level where a group of people cant hurt the price in an afternoon.

Is there a fiat currency that has this level of stability?

Many of the peaks any valleys in the fiat currency exchange are caused by a group of influential people having a bad afternoon.

I am looking forward to when many of the "giant" retailers (Walmart, Costco, Tesco, Gome, etc) accept Bitcoin (Or other Cryptocurrency) directly at checkout.

I believe this will happen in our lifetime. (They will get to control the exchange rates though :-( )

The USD, EUR, RMB have a very very high level of stability. Were talking about needing little volatility for shorter periods like a week or so if we want to have utility as a transitory currency. Over a long time is a totally different thing that realistically I dont think any currency will ever be stable in that case.

Agreed.

For the USD, EUR, RMB and GBP, the fluxuations (by percentage) are much easier to accept from an investment standpoint.

If they are they shouldn't take the wild west for granted. It should be done with caution as the political systems and government of the world will eventually look for capitol (and that will definitely involve looking into the crypto space).

Be careful people and set aside at least %30 of your profits for the eventuality that it will all be confiscated and you could be fined if found to be withholding. All exchanges will eventually be under surveillance. If you are able to do things locally like cash than you might be safe.

Hi @callaber24p , I share the same thought. As a Dutchman, I have seen the introduction of the Euro and transition from Gulden to Euro. Nobody was happy it happened, and now, 17 years later, the Euro is still not very stable.

Same goes for the British Pound now the Brits decided to have a Brexit.
Same goes for the $ USD, which heavily decreases in value now Trump is F*ing things up in America.

I think this is all very depressing to read, but it all increases the value of the Bitcoin or any other Cryptocurrency for that instance.

Kind regards,
@steve-speaks

I'm using crypto currency .

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