Aaron Olmos, Venezuelan economist and CEO of Olmos Group Venezuela granted an interview to the Banking and Business media of Venezuela talking about the current scenario of Bitcoin, and cryptocurrencies. Through the interview, Olmos shared his different points of view on different topics of crypto assets, also warning that any government entity, company or person that has its capital in Bitcoin is in a very complicated situation.
Death of cryptocurrencies?
In relation to the bad moment that crypto assets are going through, Olmos commented that the technology behind crypto assets (blockchain, wallets, exchanges, etc.) remains the same, however the reason for the current problem is that people go to the markets to buy cryptos, with the sole purpose to speculate
“If the dollar is the marker currency on a global scale, Bitcoin is the marker in the crypto-asset market in general; of the almost 19,800 crypto assets that exist, they all have a relationship, a pair, with Bitcoin, so when it goes down, all the other cryptos are impacted “Olmos explained for the Banking and Business portal.
He also commented on a necessary cleaning in the market of those crypto assets that were not very useful and were having a very bad time: “The only way is to generate stability and discipline. It is also a cleansing process. There are a lot of cryptocurrencies that are useless”Olmos said.
market vision
From the macroeconomic point of view, Olmos pointed out the reason for the fall in the price of cryptocurrencies to various factors, the first being the relevant increases in the inflation rates in the main economies. On the one hand, 8.3% in the United States, accumulated interannual, something that had not happened for 40 years, on the other, with the euro economy, where the European Central Bank also speaks of 8% inflation, and in third place the Russia-Ukraine war conflict.
“Perhaps for countries like ours it may be silly, but for stable markets, with solid economies, talking about 8% year-on-year inflation – which may have an upward trend – is quite complex”he noted with respect to inflation.
“This situation (Russia-Ukraine conflict) with inflation in the US and Europe -two of the pillars of the global economy in terms of trade- systemically affects the rest of the planet”added Olmos, who also He emphasized that the decision-making of the central banks in monetary and exchange policy is very important at this time.
In this sense, Olmos also explained that, consequently, the capitals that -speculatively- were being placed in the cryptoactive market, being directly connected to the movements of fiduciary currencies, which are managed by the Central Banks, begin to exit the crypto market, since according to its criteria Whoever has Bitcoin or Ether is not necessarily looking to keep these assets, but rather the fiat money that underlies that exchange rate assigned by the market.
“Bitcoin has become a currency speculation mechanism, because you can get more dollars or euros for a price variation”he declared.
That said, Olmos indicated the following: “When the price goes up everyone wants to be in crypto assets; when the price goes down, we see long-term and short-term liquidations, because people are afraid of losing even more of their wealth, and they move to safe-haven assets, lifelong commodities, like gold, for example.”
Bitcoin as a store of value
During the interview, Olmos took the opportunity to comment on the cancellation of withdrawals by platforms such as Binance during times of market uncertainty. In his opinion, Olmos considers it reasonable that platforms such as Binance have paralyzed the liquidations of cryptocurrencies, especially Bitcoin, since that is a reasonable risk management strategy, which seeks to stop the bleeding until prices stabilize.
“This is also done in the Stock Markets. When the price of a share begins to fall at a rapid rate, the decision is made not to allow further liquidation to try to stabilize the market in terms of prices.he added.
In this line of conversation Olmos also expressed that contrary to the discourse of some “very enthusiastic”currently cryptocurrencies are highly dependent on the traditional economy, although these continue to be decentralized, distributed, open, and function adequately at a technical level.
Bitcoin a distorted model?
Olmos, when asked if he considered crypto assets as a refuge of value, commented that although, they do continue to be a value transfer channel, but over the years their original use, which consisted of being an alternative way to transfer digital value, was distorted. “An additional means of payment: that was the original idea”said.
“With 13 years of history, it became an investment vehicle, an underlying asset for complex investment products at the level of unregulated markets, and all that financial innovation, behind crypto, is what many people now say is damaging the financial systemhe declared.
“Are they a haven asset? “No asset is an effective refuge against inflation. What is happening with the main world currencies is that they lose their intrinsic value. The same thing happens with people who have their crypto asset portfolios denominated in those currencies; are losing their intrinsic value due to rising pricesOlmos added.
“If a person has 80% of their portfolio in crypto assets, they are in trouble right now; however, crypto did not lose its characteristic of being a reliable asset. Operationally, no. There is a price correction of the projects. How far they will go down will be determined by the market. Some investors are saying that they are not going to sell crypto despite the price going down.”Olmos pointed out.
In addition to this Olmos He spoke in reference to the stablecoin, which in his opinion many have also been impacted by inflation, and was emphatic saying that currently the choice of crypto assets does not guarantee superiority, but that perhaps this segment would be the least affected.
Was Nayib Bukele wrong?
According to various sources, the nation of El Salvador accumulated losses of more than 40 million dollars due to the recent BTC crack, and in this sense Olmos was consulted for his opinion on the special case of the Central American nation and He recognized that the fact of assuming such a volatile crypto asset as legal tender, at the level of public finances, was very risky.
“It is not the same for a person to have crypto, as for the whole country to depend on BTC. In the end, the decision was received with great fanfare, but since a price drop was already coming, the possibility of the volcano bonds depended on BTC and they could not be placed”commented.
“However, it is clear that the Salvadoran experiment shows the seams of assuming a crypto as a key element in the public finances of a country”he added.
Venezuelan Context
Lastly, Olmos was consulted about the Venezuelan news regarding crypto assets and he himself declared that Although Venezuela continues to be –according to Chainalysis- one of the countries with the highest crypto adoption, it has become very difficult to have reliable statistics, since not even the regulatory entity, Sunacrip, has a statistics area to know how many operations are made with the Petro .
“More and more we see that people are using more stablecoins than Bitcoin, which the Venezuelan assumes as a long-term backup. This year the use of stable cryptos has increased in Venezuela. Beyond some situations that may be presenting with some stablecoins, it is intended that there be a parallelism with the dollar “declared Olmos, warning also that any government entity, company or person that has its capital in Bitcoin is in a very complicated situation.
“You have to wait for the price to stabilize to be able to settle. We cannot know how many people are liquidating Bitcoin in the short or long term, but we do know that there is growth in the use of stable crypto assets.”he concluded.
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