BTC index: Dec 2020 - Jan 2021
Premiums tighten amid a rapid rise in purchases of bitcoin worldwide
Many more countries saw bitcoins being sold at a discount to their national currencies during the last month. The quick shift was probably due to the rapid ascent of the bitcoin price in fiat terms, which usually sets off a stampede for the limited number of bitcoins that are for sale on the market at any one time. This tendency was even seen in New Zealand where there should be enough fiat on-and-off ramps to satisfy this kind of demand spike.
In terms of other high-level trends:
The highest premiums were seen in Lebanon, Argentina and Sudan… and of course Venezuela, which continues its shocking currency debasement after so many years.
Parts of Eastern Europe continue to see persistent discounts, which is likely due to sustained pressure to liquidate bitcoins into local currencies.
Turkey, India and Russia are some of the most interesting currencies in the index, not because they trade at high discounts or premiums, but because of how tightly their btc index values track their official exchange rates. While this issue will not go in depth on these trends this trend will be elaborated on in future (quieter) months.
Top 5 movers for the month
This month saw the addition of the Venezuelan Bolivar Fuerte to the btc index. It is not pictured in the Americas chart below because its inclusion dwarfs any other currency. Oman and Honduras regressed toward parity with their official exchange rates after hitting high premiums last month. Lebanon’s premium continues its gradual climb away from parity.
The biggest movement this month in this region was seen in perennially unstable Lebanon (-0.60). Oman reverted back toward its official exchange rate threshold. Some of the eye-drawing currencies in this basket are those that have experienced instability, such as Turkey, but have not move heavily into premium or discount territory. These are currencies where the relevant authorities have likely ‘given up’ on attempting to dirty the float and must accept whatever the market rate is.
A lot of regression back to the parity threshold this month across countries in the Americas. Argentina continues its upward march as the premium for bitcoins vis-a-vis the official exchange rate grows. Haiti, Colombia and Honduras all saw their premiums or discounts shrink. The most interesting country in the region right now is Brazil where bitcoins are selling at a relatively large discount for some reason (though this might be a hint - h/t to @Messaricrypto).
This month Venezuela was added to the index. With a value of +42.500 its inclusion on the chart would dwarf all others so it has been dropped. There’s absolutely no surprises with its rank - however what is striking is the sheer growth in the month on month changes. The Bolivar Fuerte is being debased at a rate of something like 50% per month if the premium at which bitcoins sell there is to be believed.
The biggest news out of the African continent this month is Uganda. One cannot see it on the index chart but around 3 months ago the Ugandan shilling went from selling at a discount to selling at a premium against bitcoins. The timing of this shift, which last occurred one year prior, is conspicuous given the elections held in early 2021.
The addition of Sudan to the index this month has changed the rankings as its index of +4.2 makes it one of the highest overall although its movement relevant to the prior month is relatively small.
The second biggest news from Africa is Nigeria where, in around April 2020, bitcoins started selling at a premium. Right now bitcoins are selling at an approximate 30% premium relative to the Naira. With news that the Central Bank is printing money to finance the government’s deficit (h/t @Alonso Soto) this has all the makings of a classic devaluation / debasement / hyper-inflationary environment soon. People in Nigeria have been ‘getting out’ of the Naira for a while - even if the official exchange rate indicates that its value is remaining stable.
A quiet month in Europe in terms of absolute movements but there are some relative trends worth highlighting. There is something about Eastern European countries, like Romania or Ukraine, that leads to bitcoins selling at a discount against their relevant national currencies. Knowing how much cyber-crime is conducted from these jurisdictions (h/t @Chainalysis) it would not be surprising to find that this is the outcome of laundering bitcoins into fiat to fund operations and R&D. The Russian Rouble is one of the most interesting currencies in the index, though it is not obvious from this chart. The rouble tracks its official exchange rate, in bitcoin terms, very closely. By contrast, it will be interesting to see in coming months if the Czech Republic or Serbia continue their volatility or whether they settle around some stable premium or discount.
A typical quiet month in Oceania as the Australian and New Zealand dollars remain close to parity with their official rates. That having been said, bitcoins started selling at a discount relative to the New Zealand dollar for the first time in years. This might have been linked to the rapid ascent of the bitcoin price in fiat terms during December 2020. Too much money chasing too few bitcoins? It is certainly unusual to see in such an industrialised nation, which is a signal in of itself.
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That’s it for this first monthly bulletin of the btc index. Each month a new bulletin will be posted with insights about why deviations and changes are seen across countries and currencies.