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Mercado Pago's Agostina Colaizzo on the bitcoin halving: “There is a lot of uncertainty due to the geopolitical risk”
Friday, April 19, 2024 - 11:35
Fuente: Mercado Pago

The threat of a war between Iran and Israel, as well as uncertainty about the reduction of interest rates in the US, modify the outlook Bitcoin to reach US$100,000.

Investors and users of the popular cryptocurrency are rubbing their hands over a possible historic rise following the imminent fourth bitcoin halving. During the past week, predictions had no boundaries. Crypto analyst Plan B declared through his X account that bitcoin would reach US$100,000 and then jump to US$200,000. While there are doubts about these projections, the truth is that they reflect the halving's unpredictable nature.

This is a scheduled event that usually occurs every four years. When it occurs, the amount of new bitcoins that can be generated or “mined” daily is reduced by half. This phenomenon occurs because bitcoin rules are designed to limit the total amount of cryptocurrency in circulation, which is currently 21 million.

Because the halving halves the rewards received by bitcoin “miners,” it becomes more difficult and expensive to produce new currency. A disruptive event as such generates speculation in the market, as it influences the balance of supply and demand. Ultimately, it causes a considerable price increase. But since all experiences are unique, it is worth asking what will happen with the halving in the current context. In this regard, AméricaEconomía spoke to Agostina Colaizzo, cryptocurrency expert and Banking & Investments Manager of Mercado Pago.

“Bitcoin has always been very unstable, but this year particularly, there is a lot of uncertainty around the geopolitical risk and the understanding of what is going to happen. For example, whether or not the United States Federal Reserve is going to lower interest rates and, if so, when. That also effectively impacts the price of bitcoin,” highlights Colaizzo.

Although she is aware that due to higher demand Bitcoin will rise in price, the specialist does not necessarily agree that US$ 100,000 per currency will be reached. However, Colaizzo highlights that these predictions are mainly based on estimates of the price of mining a bitcoin after the halving.

If this criterion is applied, there would be an increase of between US$30,000 and US$40,000 more than what it costs now. “This would effectively position the value of mining a Bitcoin to a point close to US$90,000. "With which it could serve as a reference to understand whether or not it makes sense for it to be worth US$100,000 according to some analysts."

On a factual level, the predicted sharp increase suffered a setback on April 17, as bitcoin fell below US$60,000. By contrast, the currency's minimum value in 2024 had been US$61,000 on February 26. Although several analysts blame the pre-halving effect for this drop, Colaizzo maintains that the main cause was Iran's war attack on Israel.

“Although if one were to base a little bit on the history of bitcoin, one would anticipate that there is still room for it to grow again even before the halving. But the reality is that around this date, there is always more volatility. And there is also a very biased component due to what happens at the trading level (buying and selling of bitcoins),” says Colaizzo.


On the other hand, the Mercado Pago executive recognizes that cryptocurrencies have become highly sought after in Latin American countries with unstable currencies, such as Venezuela and Argentina. In the latter, although the US dollar has been the traditional alternative to the peso, the truth is that the limitations on access to foreign currencies during the government of Alberto Fernández positioned bitcoin as a third alternative.

However, contrary to what companies promoting cryptocurrency claim, Colaizzo is somewhat skeptical. “I do not believe that this fact necessarily serves to make bitcoin or cryptocurrencies by themselves a reserve for value. But they can fulfill an additional function, especially because today they are more accessible through various fintechs and ETFs.”

Given the favorable policy that Javier Milei's administration has had towards the use of cryptocurrencies, Colaizzo believes that it does not necessarily imply a bitcoin boom. Given the liberalization of the economy, other alternatives to safeguard savings, such as foreign currencies, become more attainable.

“In addition, in the end there are many people who accessed cryptocurrencies without ever having access to another financial instrument. These people are not thinking about a long-term portfolio (collection of cryptocurrencies), but rather about current solutions. If Bitcoin drops in price drastically, your portfolio will become more unstable and you could stop investing,” warns Colaizzo. Given this volatility, the specialist also does not consider the idea of introducing bitcoin as a co-official currency in the countries of the region to be realistic, as Nayib Bukele did in El Salvador.

“Maybe it can happen in the long term, but many paradigms would have to change for it to happen. The fact that it is now more accessible and beginning to gain strength as an investment instrument will give it much more stability and that will take away a little of its volatility. Precisely because like any traditional financial asset, if those who invest in that currency have it as part of a more medium or long-term portfolio, that ends up giving it more robustness and it does not end up being just a speculative exchange tool,” explains Colaizzo.


Sergio Herrera Deza