As Venezuela continues to face very serious economic problems, citizens of the country are increasingly turning to cryptocurrencies out of necessity and desperation.
Last month, the peer-to-peer bitcoin exchange, LocalBitcoins, reached its highest trading volume ever in the country, just as the hyperinflation rate of the national currency has reached a staggering 10 million percent.
Hyper Inflation and Collapse
According to a recent IMF Forcast, Venezuela’s hyperinflation rate increased from 9.02% to 10,000,000% since 2018.
The country's central bank made some temporary changes to the monetary system that they hope will bring that number below one million , but most Venezuelan citizens have entirely lost faith in the national currency.
The numbers from the IMF suggest that the Venezuelan economy has been on a sharp decline since 2013. Experts estimate that the economy has declined by at least 65% in the past few years.
As the national currency became essentially useless for Venezuelan citizens, cryptocurrency adoption slowly began to take hold over the past five years.
The actual use cases of Bitcoin and other cryptocurrencies in Venezuela https://t.co/mqgFCYAPOC— Bloomberg Crypto (@crypto) July 29, 2019
Crypto has become so popular in the country that the government even attempted to release their own cryptocurrency, which turned out to allegedly be a blatant clone of Dash (DASH), which has become popular for point of sale purchases in the country.
According to the website CoinDance, which tracks a variety of statistics for different cryptocurrencies and related exchanges, LocalBitcoins,com saw a massive volume spike in Venezuela last month, coinciding with a drastic hyperinflation of the national currency.
LocalBitcoins is a website that connects buyers and sellers of cryptocurrencies, and allows them to avoid the regulated gateways that require detailed records of the transactions.
With such an unstable political climate, many Venezuelan citizens don't feel comfortable sharing their financial information with the government, which is precisely the type of considerations that cryptocurrency pioneers had in mind when they built privacy into their code.
In the graph below, courtesy of CoinDance, it is clear that there has been a steady increase in trading volume since 2018, reaching record highs last month.