Earlier this week, the Mexican peso rapidly declined in value to record lows, despite the efforts of the central bank of Mexico (Banxico) to prevent the devaluation of its national currency. Local publication El Economista confirmed that Banxico auctioned off US$4 billion dollars among Asian banks but the price of peso continued to plunge.
Both overseas and local investors firmly believe the Mexican peso will struggle to recover. In January 3, the Chicago Futures Market (CME) recorded a figure of $1.574 billion in favor of the dollar, according to analysts at El Economista.
Sources claim the devaluation of the Mexican peso is directly attributable to President-Elect Donald Trump’s statements on the Mexican automobile industry. Trump notified major industry leaders including Ford, Toyota and Fiat Chrysler that if they pursue the establishment of factories and manufacturing facilities in Mexico to export their products into the US, the companies could be under scrutiny and will be heavily taxed by the government of the US.
As seen in chart provided by Zerohedge, the effect of the Trump administration’s statement on the value of the Mexican peso is quite evident. Every statement Trump released over the past two weeks have resulted in further devaluation of the Mexican peso.
Although it is still early to establish a correlation between bitcoin and the struggling economy of Mexico, it seems as if the economic uncertainty of Mexico has led to rising demand for bitcoin.
On January 10, CNBC analyst Brian Kelly revealed that Google Trends for bitcoin spiked as the peso weakened. In fact, Google searches for the keyword “bitcoin” almost reached an all-time high record this past week, being close to surpassing Google Trends interest for bitcoin in late 2013.
It is important to consider that the previous record of bitcoin on Google Trends Mexico was established when bitcoin reached its all-time high value of US$1,160 on global bitcoin exchanges. By that definition, the interest over bitcoin is similar to when bitcoin reached record high values back in 2013.
One major factor behind the spike in interest over bitcoin on Google Trends this past week is the increasing awareness the general population has developed on bitcoin as a safe haven asset and store of value. Since late 2016, more investors and traders have begun to rely on bitcoin to avoid economic uncertainty and financial instability, which seems like the case in Mexico as of late.
It is difficult to speculate whether this trend of bitcoin will continue on for the remainder of the quarter. However, if the Mexican peso continues to devalue as analysts predict, it is highly likely that the demand for bitcoin will increase over time.
Image Via: Wikiwand, Google Trends, Zerohedge
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