As Venezuela's inflation rate reaches 8,900 percent, an ever-increasing number of its people are turning to Bitcoin (BTC) for help.
Venezuela, the South American country with the world's largest known oil reserves, should be rich and stable. However, it is suffering the worst economic crisis in its history, and one of the worst cases of hyperinflation the world has ever seen, with inflation reaching 8,900 percent last month, and projected (according to IMF) to reach 13,000 percent later this year.
In fact, according to the Economist, in the last two years, the country's currency, the bolívar fuerte (VEF), has lost 99.9% of its value. As The Atlantic says, life "resembles an old newsreel: long lines, empty shelves, cashiers weighing stacks of bills."
Therefore, it should come as no surprise to hear that cryptocurrency (and in parrticular, Bitcoin) fever has hit Venezuela.
Thousands have started bitcoin mining ("minería bitcoin"), which can be more profitable than in many other countries since the socialist regime of President Maduro heavily subsidizes the cost of electricity (to the point that is practically free). Of course, the government is not too happy with people using massive amounts of free electricity to mine cryptocurrencies, especially since very few miners are bothering to declare their earnings and pay tax.
Bitcoin is not only popular with miners. According to Business Insider, many people are using bitcoin to pay for goods and services:
Both poor Venezuelan retirees and wealthy business leaders are converting their bolivars into bitcoins online and then using the digital currency to pay for everything from doctor appointments and honeymoons to motorcycles and artisanal beer. The transactions are relatively swift for anyone with a smartphone: Websites like LocalBitcoin and Colibit function as exchanges where Venezuelans can buy and sell bitcoins using a local bank account.
It is hard to know exactly how many Venezuelans are using bitcoin, but as Eric Voorhees, the CEO of cryptocurrency exchange ShapeShift, points out, the volume of person-to-person bitcoin trading reached a record high last week:
Finally, it is worth noting that the Venezuelan government launched its own cryptocurrency (backed by the country's oil reserves), the petro (PTR), in February 2018 in an attempt to escape the effects of western economic sanctions and stabilize the economy.
The petro has so far been met with fierce resistance both domestically and internationally. The Venezuelan people have not embraced the oil-backed cryptocurrency, and Bitcoin is likely to remain the dominant cryptocurrency in the country for everyday use.