Venezuela could establish a new value for Bitcoin as a medium of exchange

It is estimated that hyperinflation in Venezuela has reached a staggering 1.3 million percent in 2018. To reconcile prices on the run, the rich and technologically savvy have turned to the stock market and to cryptocurrency.

Venezuela's deterrent economy turns people into cryptocurrencies

Fueled by rich oil reserves, the country was once one of the fastest growing in South America in the 1990s and was an economic powerhouse in the region. Today, decades of corrupt and negligent policies have put Venezuela on the road to economic disaster, and it is accelerating.

The IMF estimates that Venezuela's inflation is around 1.3 million percent, which means that prices will double in less than a month. This has led to shortages across the country of basic necessities, such as food and medicine, which are added to the difficulties endured by Venezuelan citizens. Conditions have become so severe that ten percent of the country's population has fled the country, according to The Economist.

The national currency of the country, the Bolivar has lost value. To combat the problem, Maduro defeated five zeros from the currency by issuing the new Sovereign Bolivar. Forbes defined the move as "a scam" and a simple "rejuvenation" of the problem.

In desperation, the local population took volatile crypto-currencies (and often difficult to use). On social media, Bitcoin, Dash and Zcash are often cited as the number one choices for Venezuelans trying to survive hyperinflation.

And, people from all over the world are helping the country find its way to the cryptocurrency. For example, AirdropVenezuela is facilitating donations to tens of thousands of verified Venezuelans.

According to the Coin Dance cryptographic statistics center, the volume of trade for Bolivars on LocalBitcoins increased in 2018. The volume of weekly exchanges for bitcoins rose from 170 to 2000 BTC in 2018.

Adjusting to the fall of 75% of Bitcoin from the beginning of the year, weekly trading volumes in Venezuela increased from $ 2.5 million to $ 7.3 million, an increase of 190%.

Cryptocurrency Replacement of the stock market coverage

Although the poor in Venezuela have been hit harder by inflation, the rich Venezuelans have other options to fight the problem. In the past, many have used the stock market as a sort of inflation-linked bank, buying shares to deposit money and selling it to withdraw it, as the Economist said in July 2018.

According to Barron, the shares in Venezuela have done a better job of keeping up with inflation, increasing in value (in terms of Bolivar) by 73,000% last year. Banco Mercantil, one of the largest banks in South America, operating outside of Venezuela, is the most popular stock among the rich, understandably.

However, despite the surprising growth of the Venezuelan stock market, its trade volume adjusted in dollars is minimal. Bloomberg's data suggest that the Caracas Exchange (index) had a daily trading volume that ranged between $ 50,000 and $ 3.9 million in December, numbers rivaled by the growing bitcoin trade.

The figure of LocalBitcoins is also an estimate, which does not take into account the bitcoin exchanged outside the platform. And, with a steadily rising weekly volume of $ 500.00 in USD terms, it seems that the country's appetite for some digital currencies is significant.

Although conditions in Venezuela are grim, the natural and spontaneous use of Bitcoin on such a large scale has never been seen before. The nascent digital currency could actually begin to behave like peer-to-peer digital money in the country, one of Bitcoin's original aspirations. While things are taking place in the turbulent Venezuelan economy, it will be interesting to see if the country will constitute a new precedent for cryptocurrencies.