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Monday, August 24, 2020



Bitcoin / U.S. dollar BITSTAMP:BTCUSD

It is well known that the Bitcoin move up to 20k was driven mainly by the mainland Chinese trying to get their money out of China, surpassing the strict capital controls. People were buying BTC in China with RMB and then transferring it to the western wallets and selling it for dollars.

Then the CCP discovered this roundabout and closed the loophole. Bitcoin collapsed shortly after.

Now, the turks found themselves in a similar if not worse situation than the Chinese were in.

The Lira has been falling for several years now, fueled by the countries private sector dollar denominated debts and other structural and political problems, that led to the chronically negative current account balance, and the subsequent severe shortage of dollars in the country.

The falling currency made the government impose strict capital controls, with the banks barred from lending Lira to the foreign entities, limiting one's ability to short it. Also, the common folk struggles to get their hands on the dollars, too, let alone transferring their dollars abroad. There is also limitations on how much gold citizens can buy and take outside the country now.

It is speculated that the current news of the large oil and gas filed discovery in the Turkeys territorial waters is a hoax, that the government was pushing to strengthen the Lira and make sure the level I marked on the charts does not get broken.

Also, this state of affairs helps shed light on the Turkish involvement in Libya. It's oil is known for having a cost of just 2 dollars per barrel so the extraction is profitable no matter the price and if turks manage to get Libyas oil fields, they might use the oil money to patch their current account deficit.

Coming back to the crypto matters, bitcoin was surprisingly not yet touched by the capital controls measures, and it became the channel for the wealthy turks to get their money out of the country.

Now, obviously, Turkey is much smaller than China, so it's impact on Bitcoin price will be less pronounced, but this additional demand coupled with the central banks printing money like crazy, while all other parts of the equation remain the same, is certainly an important factor in the cryptocurrency's price. Also, the Turkish government has way less control over its citizens than China, so the turks might be less numerous but might be able to pour in more money onto the market.

Looking at the charts, Lira seems to be having yet another breakout higher, so we might see another panic spike in the turks buying up bitcoins , as Lira falls to the new lows vs the dollar. And remember, that all that was happening to the Lira while the dollar was weakening on all fronts. So should DXY bounce up, the Lira will drop dead.

Now, It is always interesting to find these non-obvious links, as they show just how connected the modern world is while helping you understand Macro processes and geopolitics as the extension of the latter. I hope you enjoyed this tour of the seemingly unrelated markets.

Thank you for reading, like and subscribe and have a nice day!

from Trading Ideas
via gqrds

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