A Bloomberg article pointed out June 15 that Bitcoin trading volume has jumped to 1.3 million this past week in Venezuela. There seems to be ever-increasing excitement about cryptocurrency in the country.
In many places, people are hesitant and skeptical about digital currencies because of possible violent market fluctuations, questionable legality, or concerns about utility. In Venezuela however, no one cannot afford the luxury of being concerned. The price fluctuation is negligible compared to the devalued Bolivar. This has become so apparent that in recent months bitcoin trading has skyrocketed, with last week reaching all time highs according to coin.dance charts.
Devalued Bolivar Spurs Increased use of Bitcoin in Venezuela
The reason why this is happening is because their native government-issued currency has been a victim of unsustainable inflation and other variables. Jamie Redman, writing for bitcoin.com mentioned this issue, saying,
There have been many reports of people residing in Venezuela turning to bitcoin to hedge against the country’s economic failures. Venezuelans have been using bitcoin because their national currency the Bolivar has been significantly devalued and citizens using the tender are suffering from over 1800 percent inflation
For instance, in a recent article by Financial Times, a mother describes the process of buying food for her family. She purchases a government provided food parcel for 10,000 Bolivars. This is about the same as spending $2 USD. The issue with having such a poor performing, devalued national currency is that it could allow for political corruption, and this may be indicative of why Venezuelans are rapidly adopting bitcoin.
Referencing the Bolivar, the Financial times article said, “with such a huge difference between the market price for the goods and the price paid — and an even bigger gap between the official and the black-market dollar exchange rates in Venezuela — the potential for arbitrage, profiteering and corruption in the state-run programme is high.”
An Economic Calendar article expanded on why Venezuelans are choosing to use cryptocurrencies like bitcoin instead of the Bolivar. “Though highly volatile, bitcoin is considered more trustworthy than the Venezuelan Bolivar, which has faced massive devaluation since the oil-price collapse began over two years ago.”
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