Bitcoin has given the academics a new reliable way of detecting currency manipulation and capital controls, which is something that wasn’t possible before due to the lack of proper measurement tools. The analysis process resembles arbitrage traders’ methods, which is basically a comparison of prices in various cryptocurrency markets.
Although many governments state that they have a floating exchange rate, in reality, most central banks are involved in some kind of regulation of markets. Previous tools used to measure such influences, like oil, gold, or Big Mac price are all methodologically flawed and unreliable.
Economist Gina Pieters claims that Bitcoin offers the ability to track central bank manipulations. She presented her new research at the recent Royal Economic Society’s conference in March. According to her work, the measurement of government interference can be done by comparing data from various crypto exchanges and deviations from a country’s official fiat currency exchange rate.
The research focuses on Argentina as a telling example where newly introduced methodology was able to predict the behavior of the Dólar Blue exchange rate. Gina Pieters hopes to expand the use of her methodology:
“Before access to Bitcoin-pricing data such results would be slow, difficult or impossible to construct. The results of this study provide a new tool with which to detect the presence of capital controls.”