For many people, crypto money is still something abstract. If most people have assimilated the idea of an electronic currency, few still manage to discern its concrete applications. To better understand, it is interesting to focus on the use of Bitcoin in Venezuela. This article briefly presents the current economic situation in Venezuela and explains how it has favored the explosion of Bitcoin. You will discover why and how Bitcoin is used as a safe haven.
The Financial Crisis and Inflation
Since 2013, Venezuela has been facing one of the most important financial crises in its history. This crisis is particularly reflected in record inflation. Prices have risen to such an extent that since 2018, the term “inflation” is no longer just “inflation” but “superinflation”. In terms of figures, the inflation rates published by the Central Bank of Venezuela (BVC) are frightening: more than 130,000 percent in 2018 and more than 9,500 percent in 2019. The system has gone out of control. Yet the country has huge oil reserves. But production has come to a standstill, putting the country’s overall economy to the ground.
In concrete terms, this hyperinflation leads to a halt in imports and leads to food shortages. In addition, it causes a dramatic surge in the prices of basic necessities. For example, the price of eggs or meat in Venezuela is now higher than the minimum monthly wage of 400,000 bolivars (equivalent to $2 at the current exchange rate).
Why is Bitcoin becoming more and more attractive in Venezuela?
The advantages of a decentralized system
An important characteristic of Bitcoin that is attractive in times of crisis is its decentralized operation. Bitcoin is indeed out of the system. A conventional bank reports to a central regulatory authority and is dependent on other banks. However, Bitcoin is different because its system is not regulated and belongs only to its users (investors, miners, etc.).
Moreover, Bitcoin relies on a worldwide community of users. In other words, Bitcoin is transnational and is not impacted by the local economic situation. It is therefore immune from the consequences of unfortunate decisions made by a government or central bank. Even the Venezuelan government has seen this undeniable advantage in times of crisis since it has created its own crypto, Petro.