Topic: Can demand from an isolated market like Argentina drive up the BTC/USD price? (Read 342 times)

I just don't feel like it's going to happen because of Argentina, just like it's not going to happen because of Iran. The problems in Argentina aren't new and people were buying Bitcoin there when we were reaching new lows, so if that market couldn't even stop us from falling below the strong support of 6k in 2018, it won't make us go to the moon. That's much harder than defending a strong support.

If a bull market starts it will be mainly due to the exhaustion of sellers and too long bear market. It's already been dragging on for years.

right, not everyone knows about cryptocurrency, with the large number of people using crypto in Argentina at least increasing bitcoin demand, but indeed whether the surge in demand is significant or not, of course if significant it can have a big influence on the development of bitcoin prices

And it depends on the population of people who uses cryptocurrency. Not all people in Argentina knows how cryptocurrency works and how important it is to help the economy grow. Trading volume is also a factor because it will help the bitcoin to spread and create how chart moves because of the records and transactions that was performed. Being an isolated country is good for the adaptation of bitcoin.

It will require Argentina to invest hugely on bitcoin to affect the price. This could be by buying bitcoin on about 3 major crypto exchanges .
This possible as it will  affect the general crypto market, and cause people within South America as it is the second largest country in the region.

The Argentine government is trying to pass an "emergency law" through the Congress which could, again, increase the demand of Bitcoins at the local market (see here). The bill will charge a 30% tax to forex operations for private consumers who exchange local currency into other currencies - be it with credit/debit cards or via local cash exchangers.

This would be again a possible test for the hypothesis I outlined. If local demand of Bitcoins increases drastically due to this bill and people do not only use it to buy foreign currencies but instead HODL Bitcoin, then it could be again push the price. As the bill will come into effect likely next week, the effect could take place at the same time I expect the "dead cat bounce" of the current Bitcoin downtrend.

So, if we see 7000+ or even 7500+ next week and Argentine BTC volume is high at the same time, that could be an indication that my theory isn't completely false

Can it? Sure, will it? I doubt so. We do not live in a perfect world where we assume a country will have insane amount of economical problems so just before the currency goes belly up the people will buy billions of dollars worth of bitcoin both driving up the price of bitcoin and also save themselves from inflation and eventually sell it for more dollars to get their economy back on track.

Would that be awesome for the country and for all bitcoiners? Sure it would be the most amazing thing ever but will it be the reality? I don't think so, it is going to be just a regular inflation where nobody really cares and that is why they will not look into bitcoin. Sure there will be some few but not in a collective nation wide type of situation like how it happened in Cyprus.

of course when there is demand and a large volume it will be able to pump up the price of bitcoin. but if demand increases but the volume is small I don't think it will affect the price. and in my opinion Argentina is a third country and at present the country's economic situation is very bad. they use bitcoin as an alternative means of payment because their fiat currencies are eroded by inflation. I don't think this will affect the price of bitcoin because bitcoin demand is increasing but in small volumes.

From my observations, there are two kinds of Bitcoin users in Argentina.

The first one is using Bitcoin exclusively as a "bridge" to purchase US dollars and other fiat currencies perceived as "hard" in times of forex restrictions. This group more numerous as in many other countries, in relation to the total population - because people here know all means to get dollars, also "alternative" ways like BTC, very well, because of the bad experiences with the local currency. Buying BTC in the local market and then exchange them to dollars abroad is one of  the few completely "legal" ways to acquire more than 200 US dollars as of today, and the most easy to use for normal middle-class Argentines (the other legal ways mostly involve foreign stocks).

The second one is at least parking their money on BTC for some time, because they perceive BTC as better than the local currency, even if it's volatile, and it's a chance if they just "catch" a bull run. This group could grew in the future also because there is much less legal hassle involved: you only have to do KYC/AML locally (if you don't want to use local OTB trading) and not at a foreign exchange site which can be difficult for a South American citizen. It also does expose you much less to the risk of an exchange exit scam.

I expect that if the financial situation in Argentina does not improve, both groups could grow. The second group is still minoritarian but has also more potential to grow, because only a minority has access to foreign USD bank accounts. As I wrote in the OP, if a certain point is reached and the arbitrage market fully develops, this could become influencial for the BTC/USD price.

@Hydrogen: Good points. I have also read about the influence of African cryptocurrency schemes (most of them Ponzi-style) and their impact on the first phase of the 2017 rally, and it seems perfectly possible. However, one would have to check the data of all relevante exchanges to confirm the hypothesis.

Right. If we look at the LBC volume for Argentina, the volume despite reaching all time high after all time high is still pitiful if you zoom out and look at the volumes in other countries.

In this case I would say that it's not one single country to make a difference, but more of these economically weaker countries combined. If you add up the volumes of these economically weaker countries it's still relatively low in the grand scheme of things, but with how illiquid this market is, it will positively contribute in the long run.

If the legal systems there gear towards easier acceptance of crypto as a whole, it will help even more. The infrastructure has to be there to stimulate adoption forcefully.

If people in their millions there wanted BTC then it has to come from somewhere. You don't get special Argentinian BTC. That means less for everyone else to buy.

It hasn't happened yet and it may never. We all know perfectly well that when the crypto press shouts 'Fuckhole nation's population goes ALL IN on BTC' it really means another $500 a week or so in Localbitcoins volume.

I am aware of this fact, 200 Bitcoins back in 2015 was worth about $50 000 (price of BTC around $250), and some 40 Bitcoins today is $300 000. Therefore, we can say that the amount of money that goes through BTC per week has increased by about 6 times. But it is still a small amount of money and an even smaller amount of Bitcoin if we only look at the numbers.

Looking at the whole, it's hard to expect that Argentina alone can make a significant difference in the price of Bitcoin.

If there will be billions of buy order for bitcoin in Argentina then it would easily drive up the price of bitcoin in terms of Bitcoin/Dollar pairing. But if there will be no billions of buy order then it would be impossible for them to even change the price movement even in just a small scale. Manipulating or forcing the chart to move requires at least a few million dollars.

I might be able to cite a few examples of single markets/countries having major effects on crypto prices.

High demand for bitcoin in nations like africa could have played a role in bitcoin hitting ATH in 2017. Africa is known for having a repressive banking industry with extraordinarily high fees and taxes. These circumstances contributed towards BTC being in high demand there. It could have initiated a trickle down effect which affected BTC markets back before cross platform arbitrage loopholes were shut down.

Another possible scenario for single countries influencing cryptocurrency prices is south korea which was known for bitcoin exchanges that charged zero commission on trades. Some claimed this made it possible for whales to engage in market manipulation, driving bitcoin's value through the roof in 2017, without penalty.

And my third example for single countries potentially having a large effect on cryptocurrency prices is china. With the largest single segment of the bitcoin mining industry being housed within china's walls, their mining industry cedes them a very deep and potentially coordinated stream of bitcoin's to dump on markets at prices they determine. This in turn could give china significant control over bitcoin prices, at least until the mining industry becomes more decentralized.

I can't comment on argentina aside from remembering them for having a failing banking industry which utilized bitcoin to make cross border transactions due to it being more affordable in contrast to their own financial transaction networks.

It is very difficult for an isolated -weakened market like Argentina to drive the BTC price up.
The only thing that markets like this one can do is to increase the popularity of Bitcoin and cryptocurrencies so that other stronger markets will push the price higher.

I tend to agree with you even though I have reservations about that manipulation thing. I know that the whales, early adopters, and institutional investors of Bitcoin have so much BTC in their possession, I cannot imagine that they can get together as one in deciding whether to raise the price of Bitcoin or not. As with the cases of Argentina, Venezuela, Hong Kong, and other countries whose economies are affected by domestic problems and are said to be embracing Bitcoin, it has yet to be really proven. News that attach Bitcoin to them are basically coming from crypto-related news publications.

If there is anything that the market have shown us in recent times, its that the activities of an isolated market does not influence the entire crypto market because while the Argentine market was on the increase, the global market was more of constant which later began to decline. It also shows another message which is that the argument of market manipulation is not a cheap action, because if the entire Argentina market volume cannot push the price up, I wonder the amount a group of people would have to invest to pump the market.

Any condition can be happen, but we must prepared for the worst, i mean prepare if it can affect on price bitcoin get dumped. But foe me, i think country with problem like in Argentina, or maybe like what happen in Greece in past, people will start to buy bitcoin at least it will be better because they can sell it in exchange as long it not blocked in their country.

It will all depend whether people there would trust Bitcoin more than USD. If people trusts BTC more, then chances are they are gonna hold their Bitcoins and could potentially bring prices upward. On the contrary, if they would not trust BTC due to its volatility, then it's more probably that they'll immediately go with USD because it's generally more stable and they wouldn't worry about losing too much.

Theoretically yes. There won't be much availability in a country like that so it would have to come from markets elsewhere. But all of the previous cases like Cyprus, Greece, Venezuela etc were a crock of shit in my opinion and straw grabbing by Bitcoin zombies.

And why would any of them choose BTC over USD? You'd be able to get almost any Argentinian to accept dollars. Maybe 1 in 50 or 100 or 1000 would accept BTC.

We have another isolated market to draw on which is South Korea. Throw in their wealth and you wound up with a market that the rest of the world has pretty much chosen to ignore because it's so stupid.

In Argentina, it's not only middle-class "individuals" who are trying to exchange their Pesos for "hard" currency, but above all very wealthy people and also businesses. And Bitcoin is known to them as a way if the official forex market is closed. Actually, at some days the ARS/USD exchange volume was about 1 billion, which had to be covered by the Central Bank. If half of that went into Bitcoin, 500 million dollars (~60K BTC) are a nice amount which could result in a price spike.

However, I doubt that local Bitcoins markets are able to handle such volumes.

There are many more markets in Argentina than Local Bitcoins. There is Ripio, SatoshiTango, ArgenBTC, and Bitex.la (to  mention some I know). Ripio is the only exchange where I can actually see volumes for the ARS/BTC trading pair, which are about 20-40 BTC/week (see here), so it's still very low. So you're right, we currently don't see a Bitcoin run in Argentina, but we also currently are going down with price. As I wrote in the OP, in December when the new government is innaugurated, that may change.

You know the price of BTC in 2015 and 2016, right? But yes, on the whole you're right, for now I don't see an "explosion" at local exchanges, as measured in USD, from 200 BTC back then to 20-40 BTC now the volume increased only slightly (at least at LocalBitcoins and Ripio, the only ones where volume is shown).

As I wrote before, there are very wealthy people in Argentina who tend to use also "alternative" means like ARS->BTC->USD to get "hard" currency and escape the Peso downfall. They even speculate with BTC - Argentina is actually a market where cryptos were embraced early (in 2013 there were already plenty of users and services, and with Sergio Lerner even an Argentine contributed to Bitcoin Core). You may be right that the poorer 50% do not have the means to even think of BTC, but Argentina has a strong upper-middle class which is less affected by the current economic crisis. It's just the poorer 50% who are in trouble now, and most of them never were able to invest in BTC.

I don't think so, it's a technical question about possible influences of an isolated market with no direct connection to the BTC/USD price via arbitrage and other influences due to (BTC) supply changes, and Argentina (a country I know very well) is serving only as an example.

We already know how the central bank banned the Bitcoins buying and selling from the bank account and we all are very familiar with the fact that they actually set this whole trading record just after it was banned , which means that the public is very active when it comes to cryptocurrencies there and it showed the banks how much less of an influence they have over people and that is a good thing.
I think it can ofcourse  do something like that and people doesn't need to hold Bitcoins even trading will be good for them.

In my opinion, Argentines have very little purchasing power to make a significant impact on the crypto market (ordinary people). But this Argentina case is nothing new, they did not start to trade with BTC this year, nor is this year particularly significant in terms of transaction volume. If we look at the statistics for LocalBitcoins in Argentina, it will show us that only 31 BTC is traded in last week, and there were spikes with 200+ BTC traded back in 2015 and 2016.

There is no doubt that the volume has grown as far as the Argentine national currency is concerned, close to 20 million of Argentine Peso in last week (an absolute record). But it should also be emphasized that ARS falls in value this year, and their annual inflation is more than 50%.

https://coin.dance/volume/localbitcoins/ARS/BTC

The two scenarios can both be happening or developing in a market like that of the Argentina because we not just dealing with a hundred people but way more than that and that market dynamics demand people to have different vision and strategies of what they want to happen with their Bitcoin on hold. I am sure that any increase of demand for Bitcoin can eventually affect its price movement. In scenario one, this can be so evident. Argentina, Venezuela and Zimbabwe are always on the news relative to Bitcoin as these are three countries where demand for the coin is quite solid and even expanding while their economies are suffering from many enormous setbacks and gargantuan problems.

I think I have read an article more or less a month ago that the price of Bitcoin in Argentina is more expensive than the price of Bitcoin in the worldwide market. If I am not mistaken, Bitcoin is valued at more than $11,000 in Argentina when the article was written. Bitcoin must be cheaper than that in the open market outside the country. That could mean that the demand of Bitcoin within the country is higher but its demand does not really pump up the price of Bitcoin outside. It must have something to do with their accessibility to Bitcoin.

that's right,no matter it come from isolated countries or developt countries as long as their community have huge trading volume it could drive bitcoin price.the think that needed for crypto market besides sentimental was trading volume ,if any countries could issue good policy it will support market movement.except china and korea  their community really needed for crypto market development.

If the country has large trading volume it could affect the prices immediately but if its minimal then definitely the market won’t feel the change. We should also consider who are those Argentinian adopters probably mixed and the majority are common citizens.

The thing is the whole market is generally formulated of different small fractions of trader who hold a certain opinion. I mean to say if the market is going up, it means people are buying. Now out of all these buys 20% might be the people who think it's the next bull run, 20% might feel that it's a correction on the upward side, 20% might be just closing there sell position, 20% might be hodling and 20% might be buying due to various other reasons. Now on a whole no opinion can be certainly decisive to give btc a bull run. But what happens is that opinion of certain group influences the remaining to create a bullish scenario. For example, if after a certain point the people hoping for correction think that it's not a correction but agree with the people thinking of bull run now 40% of the market is together which is enough to drive price anywhere.

Now coming to your question: Argentina may be small group among these people but certainly nothing to have such an impact on global currency. I am saying this because there are almost zero major exchanges in Argentina with great volumes of BTC compared globally. So best Argentina would be able to do is drive price a bit higher but btc could be sold at a pretty high premium in Argentina for pretty long.

If Argentina is making a huge demand for bitcoin whether in coinbase or else exchange doesn't matter. The thing is it can cause price surge. If we take a leave from economic theory, the higher the demand we get, price will go up. So, this is also applicable here with bitcoin demand.

Argentina have low volume compared to other countries, I don't see it affecting the prices much. One way I think the Argentina situation can influence is if it spills-over to other Latin American countries. If Argentinians do well using Bitcoin and another country there, say Brazil, start having the same problems, the people already know what to do.


I think they might also not be buying USD immediately should there be a need for them to flee (just cash out in whatever other country you move to) or should the government just close their bank accounts that have those USD.

I do not think that what is happening in Argentina will push the price up or down, especially since the news is not related to Bitcoin, but to indirect restrictions on it.
So what happened will affect Argentina and may affect the exchange rate in that country with a difference of about 500 dollars.
The impact will be on the exchange rate against the local currency, where there will be two Bitcoin prices as happened in many countries and the price in Argentina may be different from the price in the rest of the world because of increased demand and fear of the collapse of the value of the local currency.

I'm not sure Argentinians are actually adopting bitcoin as an alternative to the peso, though.  You could ask the same question about Venezuela and the answer would be the same--I don't think people in these crisis countries are spending a whole lot of money to buy bitcoin, because I don't think they'd be able to buy food, pay rent, utilities, and all of their daily needs with bitcoin.  That's basically how it is in the rest of the world as well.

Argentinians are turning to other, stable currencies and not to crypto--at least not to an extent where there would be enough of an increase in buying that would lead to a price increase.  And OP, if I may say, this is kind of a selfish question to even be asking.  These people are in serious trouble, and whether their plight might lead to a higher bitcoin price is a questionable one to be raising.

It seems to me that someone who lives in Argentina and knows the local environment would have to say something. In my opinion, more about how cryptocurrencies can help Argentineans is talked about outside of Argentina itself. It seems to me that people living there do not know about such opportunities. If the use of cryptocurrencies became common in Argentina, I am sure it would have a big impact on the Bitcoin price and many other Altcoins.

Argentina's weekly LocalBitcoins volume is just 20M peso ($340,000) - source. So, it's already unlikely that a country with such a small volume could influence the price and cause a huge rally.

But also you can see that the price growth in large spikes rather than having slow and steady growth. It's unlikely that a large group of people, like a population of some country, would suddenly wake up one day and all decide to buy Bitcoin and cause an explosive rally.

So far the regions that hold the most influence over Bitcoin's price are the US, EU, and Japan, all other don't have enough volume.

Not on it's own. But combine demand from Argentina with demand from another much richer jurisdiction - Hong Kong - and yes, you could get a critical mass of demand building that starts to move the bitcoin price up.

The Hong Kong protests started in March, and if you look at the bitcoin graph, the price starts to rise around March-April. The key thing about Hong Kong is that some people there have considerable wealth, and if they buy bitcoin, they don't immediately sell for dollars, instead they hold because it's a safe way to store savings.

I believe that if a large number of people in a country like Argentina start using Bitcoin as a safe place for their savings, it will affect Bitcoin. It’s not just the direct affect of increased demand, but also the indirect affect that Bitcoin will be seen as a safe haven in an economic crisis.

That was a pretty interesting event. To pick a scenario, assuming that what the events OP said could be the cause, i'd pick scenario 1  which results in an upward pressure. Simple reason is because it has already happened. People of Argentina have already held BTC when they bought it and saw it's possible effects on their cash, so if a second time may occur, even if it is in their local exchanges, it should still be able to affect the market positively.
Although because it's coming from their local markets, the increase may be lower than what was experienced the last time.

Will they boost demand? Absolutely. Any time there is more usage cases for BTC there will be increased demand.

But will it actually result in a big price hike like some expect? I highly doubt it, especially when you take into account how little buying power individuals have (especially in struggling economies) compared to speculators who are able to influence the market much more by simply trading on leveraged derivative products.

I remember a similar thing being raised for Venezuela, with stats on LBC showing that trading volume increased significantly - even though it was still minuscule compared to the grand scheme of the market, within a few hundred BTC a day.

Of course, if the demand is significant, it will increase the price globally (assumed that the trader can take the benefit of arbitrage). I don't know the situation in Argentina though, but I assumed that even there is government restriction, they will find some way to trade.

If the demand is not significant, it will increase the price locally for a while, because after traders take the opportunity to arbitrage the BTC price difference, everything will come back to "equilibrium."

Except, of course, if the government severely restricts BTC trade at the point of no traders dare to take the arbitrage risk.

(Warning: Long text ahead )

In some threads (in other forum sections) I have already written that one of the explanations I had for the last price jump up to 10.000 USD at the beginning of November was a run on Bitcoin coming from Argentina. As some may know, in Argentina, at the end of October forex restrictions came into place, creating a demand for alternative ways to get (supposedly) "hard" currencies like the US dollar. One of these ways is buying Bitcoin and later selling them for USD.

In this case, the mechanism driving up the price could have been the following one:
- Argentines buy Bitcoin at Coinbase and other similar exchangers with credit cards, with the intentions to buy US dollars with them afterwards.
- Their native currency (Pesos) are exchanged into dollars by their bank in Argentina, and then the dollars were used to buy the Bitcoins at Coinbase. This drove up the BTC/USD price, as from the point of view of Coinbase, USD were used to buy the BTC.
- That run may have caused "only" a $300 or $500 increase, but created an artificial sentiment change, and other people begun to buy, at the same time shorts were liquidated, leading to the crazy $3000 spike from $7.5K to $10K.
- The Argentines now began slowly to sell their Bitcoins for US dollars, but most likely they saw that the BTC price was increasing, so they waited some time, and that didn't affect the bull run. The price return to the previous values we're seing now could be actually that Argentines and those who fell into the "bull trap" are selling the coins again, because otherwise fundamentals have not changed.

Now at November 1, the Argentine government has restricted the policy again, requiring permission from the Central Bank to buy crypto-values with credit and debit cards (because of the demand for dollars that creates in the local forex market), and thus the "Coinbase method" is closed.

However, there is obviously another way: they can also buy Bitcoins at the local market. This lead to a crazy price jump at Argentine coin websites, up to $12.000 and more.

Well, finally, the question I wanted to be answered: Could a massive demand increase from an "isolated local market" like Argentina, where only the local currency BTC market remains intact, influence the Bitcoin price in US dollars? And: Would it lead to upward or downward pressure?

We can see two different scenarios:

First scenario: Argentines buy Bitcoin at local market and hodl them, at least for a while.

1) First, this means that at local currency exchanges, price goes up, because the supply cannot satisfy the demand.
2) But if the premium is high enough, even if the Argentine Peso isn't an attractive currency, some will see an opportunity for arbitrage: they will speculate that it will lower at local exchanges if supply increases. Their sell orders increase the Bitcoin supply at the local exchanges. The Bitcoins used for that could come from other arbitrage markets, and thus the supply at the other markets will lower. As arbitrage markets tend to be connected, this movements could drive the price up.
3) The "satisfied" Argentines will now be inside the crypto market and won't sell for a while.
4) Meanwhile, the speculators who bought the Pesos, will wait for the price to become attractive (lower than they sold) at the Argentine local market, and then re-buy, completing the arbitrage operation. If they are successful, they could have got more BTC out of the operation than they sold initially. Or at least they could have "equalized" the price increase due to step 2.

In this scenario, we do have upward pressure. Steps 3 and 4 are neutral for the USD price, but step 2 takes away BTC supply from the USD/BTC market.

Second scenario: Argentines buy Bitcoin at local market and exchange it rapidly to dollars.

In this scenario, phases 1) and 2) are similar. But then it would change:

3) Argentines sell the Bitcoins to USD. This would result in a downward price trend.
4) would be equal to scenario 1, only the local market would be affected.

In this scenario, we have upward (step 2) and downward pressure (step3) at the same time, neutralizing themselves. This should have no price effect.

Now, as we can think of that at least some Argentines would opt for HODL, then an Argentine demand increase on price should have always positive influence on all exchange rates including BTC/USD, even if their currency is "isolated" from the rest of the world.

There could also be a "delayed" effect like in the situation I described at the start of the post. Argentines could buy, leading to a shortage of supply, and sell to USD later than expected, because they see the price starts to increase and want to "ride the wave". In this case, we could even expect a similar jump like in late October. Obviously only if the "run" is massive enough.

What are your opinions?

PS: If the first scenario becomes reality, then I predict a Bitcoin recovery in early December (Hint: government change.)