The economic crisis in Venezuela and Bitcoin as Help.
Currently Venezuela has the world’s worst performing economy, hit by 700% hyperinflation and sinking in debt. Its currency, the bolivar, is currently losing half its value every 18 days. However, the government announced on Monday that it will remove the country’s largest banknote (100 VEF, worth $0.02 on the black market) over a 72 hours period.
As all countries suffering from hyperinflation have done in the past, the Venezuelan government just announced the removal of the largest currency denomination (100 VEF, only worth 2 U.S. cents). They’ll also print larger ones (up to 20,000 VEF, due on Thursday). With hyperinflation expected to reach a staggering 1600% next year according to the IMF, a situation can be envisaged in which the government will repeat this process until the currency is dead and the wealth of Venezuelans disappears.
Venezuelan authorities used the same “excuse” as the Indian government for removing the large banknotes, namely “to eliminate corruption and fight mafia.” The lack of planning and future roadmap is likely to result in a cash chaos in Venezuela as it did in India. However, the economic situation in Venezuela is much worse, hence one can fear that the consequences for the population there could be even more tragic.
President Maduro also decided to close the borders with Colombia on Monday, preventing any additional capital flight out of the country. But this move will also prevent the population to access foods and other supplies that were being imported from Colombia, since the shortage of basic supplies is now too common in Venezuela.
How does Bitcoin help in the midst of this crisis?
In a country hit by hyperinflation and infinite money printing, blocked by capital controls and closed borders, bitcoin often comes to mind: Venezuela is ranked 2nd in the Bitcoin Market Potential Index (BMPI), which is responsible for measuring where in the world the potential for bitcoin adoption is the greatest. With its unique characteristics (borderless, outside of governments manipulation, anti-inflationary, finite supply, decentralized, censorship-resistant), bitcoin could be a lifeboat that previous generations never had. One can already notice how bitcoin is able to bring supplies into the country when almost all other ways are not working anymore.
In a recent interview with some Venezuelan Bitcoin users, they described the impacts that Maduro’s decision will probably have and how Bitcoin can come to rescue in his country.
“Personally I use bitcoin as a way to save and secure my money, in order to protect my wealth from the hyperinflation we are currently facing. Bitcoin really can help Venezuela bloom economically and relieve Venezuelans from these controls imposed on us. ”
“The truth is that bitcoin helps us to guard and protect our money outside of any economic measure that the government will implement to harm us. Each day the trading community is growing in Venezuela, but it grows in mere clandestinity, very very underground.” This according to the user interviewed.
Facing fears of repressive government, mining activities are also growing in Venezuela and represent the last chance of survival for some Venezuelan miners who must remain underground in the midst of the collapse of the socialist country. Venezuela is a reminder that all fiat currencies can go bust, but this time there’s an alternative that was not available some years ago, this is Bitcoin.
Disclaimer: This press release is for informational purposes only. Information does not constitute an investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent infocoin views and should not be attributed to Infocoin.