Time and again it appears as though Bitcoin weakness coincides with problems in countries run by dictators for a lack of a better word.
Maybe it is a coincidence that Bitcoin's recent slide that started in early January just as Venezuelan bonds started rallying on hopes that Juan Guaido could be a credible replacement for Maduro. The first serious mentions of Guaido occurred on January 5, but they didn't get real traction until January 10. Bitcoin was above $4,000 on January 9 and fell as low as $3,360 this past week, before bouncing nicely on Friday. The Venezuelan 7% bonds due in 2038 were trading at 23 cents on the dollar on January 9 and rallied as high as 32 this past week. They declined as during the week as Bitcoin rallied.
It could be coincidence, or it could be that a dictator facing international pressure and steep declines in oil revenue was selling Bitcoin to fund operations?
That sounds like a conspiracy theory and there is no evidence that Madura or his cronies owned bitcoin, but this isn't the first time I've noticed this trend.
Starting at the end of July 2018, Turkish Lira collapsed by 40% in just a couple of weeks. Bitcoin tumbled 25% in roughly the same time period as it dropped from over $8,000 to barely $6,000 (it has not traded as high as $8,000 since then).
This negative correlation between bitcoin and emerging market currencies surprised me at the time, but it does fit my narrative well.
While still sounding like a conspiracy theory, it does seem possible that Turkey had been accumulating bitcoin as it allegedly helped countries avoid certain rules affecting oil in the region and that they then used those bitcoins to help offset problems caused by a plummeting currency.
Even North Korea seemed to exhibit this sort of pattern. With North Korea, it seemed as though whenever tensions rose surrounding their nuclear threats and the United States' economically punitive response, bitcoin prices slid.
In an 'ideal' world, I would expect to see Bitcoin prices rally as countries with serious problems floundered as their citizens rushed to buy crypto to protect themselves (much like gold has done time and again). Yet, for now, the flows seem to be better correlated with the narrative that dictators have accumulated bitcoin to hide wealth and that they sell it when necessary.
I continue to look for reasons to recommend buying bitcoin and other cryptocurrencies. For signs that decline that started in December 2017 is finally over, but I cannot see them. I will give full credit to the progress the crypto ecosystem is making and the improvements that are occurring, but I continue to believe Bitcoin has not bottomed and we are still drifting towards $2,000 without a meaningful uptick in prices.
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