You would think a high liquidity market such as Bitcoin would present small spreads from country to country. But that’s not the case at all. And it’s not Bitcoin’s fault.
With the speed of cryptos, investors have gotten used to very fast transactions, even complaining when a settlement takes more than an hour to complete. While we forget that, until cryptos became a thing, the fastest money transfers took at least an hour on best case scenario and cost you a hefty fee. Not to mention SWIFT and IBAN transfers which can take anywhere from several hours to days to complete. And in countries like Brazil, where forex is heavily regulated, exchange can take even longer due to paperwork and bureaucracy.
Back to the case in point – take Zimbabwe’s curious situation as an example.
BTC is currently worth around U$ 10,000.00 in Zimbabwe, while prices hover in the mid $5000’s on average in Western exchanges. Same with BTC in China – while crypto regulation sits in nimbo, waiting for the Communist Party to decide its future – prices seem completely detached from supply and demand.
Overly regulated economies expose the fact that FIAT is no longer adequate for worldwide commerce in the XXI century. The distortions observed in the outlier BTC prices are entirely due to State intervention and other inefficiencies. The bigger the distortion in crypto-to-FIAT price, the stronger the indication that something’s wrong with that country’s forex policy.
Today’s competitive market no longer tolerates the delays and bureaucracy that comes with FIAT remittances. If anything, cryptocurrencies have exposed the deficiencies in worldwide financial systems. While it was very difficult for the small investor to access reliable forex data, cryptos have allowed the average Joe to access worldwide currency supply and demand data in real time.
Cryptocurrencies have opened the black box once reserved to subscribers of expensive financial data services. No wonder big bankers are going crazy over cryptos, they are concerned – and should be. Cryptocurrencies have given everyone free and open access to the ledger, and now everyone knows where the money is.
Publishing books was once reserved for editors and universities. With the home publishing revolution of the late 80’s and early 90’s, anyone could publish a book right from home. Cheap laser printers and PC software changed publishing forever. The Internet changed work relations forever, with home offices becoming ever more common, avoiding expensive and wasteful commutes. Seems like every niche, from brewing beer at home to building 3D printers has become decentralized. The power is flowing to the individuals with unprecedented speed. It is only natural that currencies would also be decentralized at some point – but nobody expected it to be done in such an unconventional manner. Bitcoin has a mysterious origin and few expected 40 year old cryptography technologies to form the cornerstone of the distributed ledger. The solution to the dreamed e-currency was sitting right there in front of us all until a certain Satoshi Nakamoto put the pieces together. And then Pandora’s Box was opened.
The outlier prices in cryptos expose economies in which the State and special interests rule the forex game. And that is a very, very, good thing. The power is being distributed to individuals and States must either fix themselves or perish.