On the seven days leading to August 31, 2019, Venezuelan P2P platform users exchanged bitcoin for the main currency of Venezuela,, 114 billion sovereign bolivars ( VES), which was higher than what was set in the previous week at 77 billion VES. VES is the ISO code of the current currency of Venezuela.
Hyperinflation in Venezuela
The massive increase in bitcoin trading volume is linked to hyperinflation, which continues to ravage Venezuela’s economy, making it hard for people to afford basic essentials. According to CNBC, Venezuela’s hyperinflation is currently at 10 million per cent.
The Trump administration froze the assets of the Venezuelan authorities in July, thus worsening the inflation situation.
Since President Maduro took over in 2013, the economy started to collapse due to mismanagement of funds, corruption accompanied by high levels of debt.
There Bitcoin seems to be the only option to alleviate the effects of hyperinflation.
Bitcoin- A Safe Alternative
Venezuela’s hyperinflation has seen the increased adoption of bitcoin as a non-corruptible alternative to the already compromised VES which has lost 99.99% of its value since 2011. While bitcoin itself is volatile (now at $9,800 per BTC down from $20, 000 in 2017) it still holds much value compared to the bolivar.
It is projected that Venezuelan’s prefer bitcoin to the dollar, which has become scarce and attracts the attention of both the government and criminals.
The mass adoption of bitcoin in Venezuela has led to the increased set up of cryptocurrency ATMs at banks in Panama. For instance, Cryptobuyer has already set up a Bitcoin ATM at Caracas and is currently in operation.
Juan Guaido, the self-proclaimed interim president, has actively called for bitcoin usage since 2014. Additionally, non-state entities are attempting to spread bitcoin usage and awareness among ‘Venezuela’s citizens affected by the hyperinflation. This is the main reason for the increased BTC trading volume in LocalBitcoins
Bitcoin vs Petro
The Venezuelan government created its own digital currency Petro (backed by the ‘nation’s oil reserve) to counter the hyperinflation, which is now at 10 million percent. The government led by the embattled incumbent president, Nicolas Maduro is pushing for the increased adoption of the state-issued cryptocurrency Petro.
Petro has already come under controversy with claims of lack of transparency attributed to blockchain and ‘bitcoin’s anti-government, libertarian policies. The U.S. has already sanctioned Petro claiming that they doubt its financial sovereignty since its launch in Q3 2018.
A remittance system for Petro was launched in the past week to spur its adoption and usage. However, its launch in 2018, there has been little evidence of any adaption of Petro in Venezuela. As it stands, it seems that bitcoin will continue to dominate as the country’s preferred means of transaction