Tuesday, February 27

The Chilean peso in low hours, is it time for alternatives like bitcoin?

Key facts:
  • For Guillermo Torrealba, CEO of Buda.com, bitcoin is becoming “explosively” popular.

  • Cristóbal Pereira (Blockchain Summit Latam) sees bitcoin as an investment alternative.

The Chilean peso (CLP) is going through low moments. Between the end of last year and the beginning of this 2022, the Chilean national currency has reached its lowest levels of appreciation against the dollar, raising alarms about further depreciation in the near future.

Despite a slight rebound, the situation of the Chilean currency remains very similar to what we reported in CriptoNoticias a few days ago: free fall, in a sustained loss of value that takes the CLP to levels only seen in 2020. Inflation, meanwhile, breaking monthly records.

As we said, this situation is not new. At least since 2019, when there were a series of strong protests against then-President Sebastián Piñera, Chile’s political instability began to be transferred to the economic sphere. And then came a more general crisis, a product of the pandemic.


The current levels of the Chilean peso against the dollar are only comparable to those at the beginning of 2020. Source: Investing.

«Investors began to leave, added to the issue of the pandemic, they went to look for investments in other countries,” Chilean bitcoiner Cristóbal Pereira, organizer of the Blockchain Summit Latam, one of the most recognized events on the Latin American circuit, told CriptoNoticias.

For Guillermo Torrealba, CEO of the exchange Buda.com, another reality should be added to the equation: “interest rates at negative levels as a result of the overheating of the main economies of the planet, [razón por la cual] the entire world is under historically high levels of uncertainty and investors from small countries tend to prefer their investments to be in stronger economies than in the emerging ones. The latter would be the Chilean case.

The truth is that the peak of the peso’s fall occurred in the middle of last December, when the dollar touched 870 CLP in the foreign exchange market, according to data from Investing. And Carlos Baeza, a developer who is part of the team that proposed a digital currency (Copihue) anchored to the Chilean currency, sees the outlook since then with a hopeful tone.

This [la ligera recuperación del peso en semanas recientes] It may indicate that our economy is stabilizing, capital flight is down, and added to the inflationary scenario of the dollar, the Chilean peso is becoming stronger.

Carlos Baeza, developer of Copihue.

After bottoming out in December, the Chilean peso has made a slight recovery. Source: Investing.

The peso is weak: bitcoin time for Chile?

With this scenario in the background, one wonders if Chileans will seek refuge in new instruments, investments or assets such as bitcoin, as has happened in other countries of the region. The question also arises as to whether, on the contrary, the relative strength of the local currency will remain as an obstacle for the adoption of cryptocurrency to take new levels in Chile.

On this subject, Baeza considers that the South American country is economically stable enough so that Chileans are forced to adopt bitcoin or another cryptocurrency due to “a financial need as a reserve of value in the face of possible inflation.” The developer considers that the adoption of these new economic paradigms will come rather “hand in hand with leisure and recreational activities.”

Pereira, for his part, partly agrees with that position. For the organizer of the Blockchain Summit Latam, interest in cryptocurrencies has already been brewing in Chile, although not necessarily due to the depreciation of the local currency.

We have seen a lot of interest to learn about crypto, investing, DeFi, NFT. I don’t know if it was 100% caused by the depreciation of the Chilean peso. I think more because of the considerable increase in the price of cryptocurrencies that has attracted these investors. And above all, when they learn about cryptocurrencies and inflation and basic economics, they realize that they are in a good place to protect themselves.

Cristóbal Pereira, organizer of the Blockchain Summit Latam.

Torrealba does not think the same. In your view, the economic situation is worsening and is pushing people to look for new alternatives. Therefore, faced with the possibility that the fall of the peso will bring Chileans closer to bitcoin, the CEO of one of the main exchanges in the region responds:

Absolutely. Chileans are reliving the apprehensions that we did not experience 30 years ago, when memories of extremely high inflation were still fresh. People are starting to look for alternatives, and while I still think Bitcoin is a loophole for the more studious or brave, its popularity is growing explosively.

Guillermo Torrealba, CEO of Buda.com.

Despite this scenario, Torrealba clarifies that the situation has not yet marked the commercial activity in the exchange, with a presence in other nations in the region, such as Argentina, Colombia and Peru. On the one hand, Chile is “one of the countries where the volumes traded have increased the most in Latin America”. But on the other, he adds, the market is moved more by the international context than by particular local conditions.

“I still don’t see a great correlation between the peso and Bitcoin locally […] volumes have fallen in line with the global market. They have fallen less, in fact, but in line with expectations,” he added.

Bitcoin: volatility, savings, investment?

In recent years, bitcoin has become one of the household names in the financial world, with major companies and personalities praising its differential properties with respect to traditional assets.

Some have even compared it to gold and argue that cryptocurrency is the best vehicle to preserve the value of a portfolio. Among them, Michael Saylor, CEO of MicroStrategy, the company with the most bitcoins purchased. About 124,391 BTC, about 5.3 billion dollars according to BuyBitcoinWorldwide. For Saylor, cryptocurrency is the best defense against inflation.

Chilean interviewees are more cautious in their view of the opportunities offered by bitcoin. In fact, Pereira starts from a differentiation to reflect on the potential role of cryptocurrency in the economy of an average Chilean: “You have to differentiate between saving and investment.: saving is fixed interest, investment is somewhat more volatile. Of course, bitcoin is a good investment alternative for anyone, especially today for Chileans, but always with a medium-long-term view.

For the also CEO of Latam Tech, the minimum term to consider an investment in BTC is two years. “Ideally four, knowing the cycles of bitcoin,” he adds, referring to the process of reducing the issuance of coins in the Bitcoin network, known as halving, and which occurs approximately every four years.

In any case, I see it as viable as a percentage of Chilean heritage. 10%, 15%, and as long as they are willing to see high volatility.

Cristóbal Pereira, CEO of Latam Tech.

Baeza and Torrealba agree with Pereira in this regard. The latter even alleges that, for those who can consider investing with an eye to at least 3 or 4 years, “bitcoin is probably the best investment you can make.”

Don’t invest more than you can lose, but saving absolutely nothing in Bitcoin is almost irresponsible […] However, not being scared by volatility and understanding that just as Bitcoin recovered from all the falls in the past it will most likely recover from this one, requires discipline, and people don’t have that much financial discipline. It takes time to acquire it. It’s definitely possible, but it takes effort. But the numbers show us that we are indeed achieving it. There are more and more hodlers, and it makes us very proud.

Guillermo Torrealba, CEO of Buda.com.

Being a “hodler”, the word Torrealba referred to when talking about long-term investors, implies not only an investment position. That term, curiously born from a typing error, is also a position on bitcoin that was born, curiously, from a typing error. Right now, the word with which they identify those who see in cryptocurrency a powerful tool for the protection of value of their funds and they see the charts (they read the market) looking at long periods, without the “noise” of volatility.

Is this then the position taken by new Chileans who enter the world of cryptocurrencies, in response to the recent economic instability in the country?