INCENTIVES: If one believes fiat will decrease in value and Bitcoin will rise in value, they are incentivized to take a loan in fiat and invest in Bitcoin, paying the loan back later and profiting from the difference - also called a **carry trade**.

The weaker the local currency, the more of a no-brainer it becomes to borrow it.

In this process, through the loans, banks create **more** weak currency, amplifying the problem.

The immediate effect of this is that **the local** price of Bitcoin goes up. The higher local price incentivizes traders to perform **arbitrage** for profit - buy the cheaper bitcoin in foreign dollars, sell it for the more expensive local currency, then sell the local currency for dollars.

This additional sell pressure **further** weakens the local currency.

The local central bank is powerless - it has limited tools to deal with this that cannot be applied for a prolonged period of time.

Take Peru as an example in the attached image:

- Bitcoin market cap at $22,000 - $424B

- Peru GDP - $223B

-- an excerpt from the 2-minute version of Speculative Attack (2014): https://2minutebitcoin.org/blog/bitcoin-speculative-attack-on-the-dollar-2014