With the global health of banks not in a good space thanks to a potential financial crisis looming, some countries have essentially thrown in the towel sending their economies into a tailspin. Lebanon is one such country that is facing a banking crisis that is not only damaging its economy but also looks as if the only outcome will be total collapse. Bitcoin has been and could continue to serve as an alternative.
Inside the country, citizens are being faced with an extreme devaluation of the local currency to its USD peg, $300 weekly cash withdrawal limits, empty ATMs and extreme difficulty accessing their money at the banks. As a total collapse approaches, Bitcoin again shows its value in a destabilized financial system.
Lebanon becomes another example of how people in positions of power have the ability to destroy economies and financial system leaving everyday citizens, who are forced to trust them with their money, in financial ruin. Bitcoin’s decentralized offering and lack of central control shine bright in cases like this, and for the Lebanese people especially, it will begin to look like a lifeline.
Another Failed Financial System
The root cause of the troubles in Lebanon began with mounting debt and then the sudden disappearance of Prime Minister Hariri who emerged in Suadi Arabia and announced his resignation. Bank deposits plummeted and interest rates spiked.
Already heavily indebted to the US, they tried to bolster their dollar reserves by highly subsidizing USD deposits. Cryptocurrency investor Andrew Kang (@Rewkang), in a thread on Twitter, explained the ultimate effect of these policies.
It has now been estimated that the country needs a $20-$25 billion bailout, but this is highly unlikely as the general economic situation in the country is far from favorable for financiers. The knock-on effect of all of this is there is less money for citizens in the street to get their hands on.
In November last year, BeInCrypto reported that the country had limited withdrawals to $1,000 a week. It has now dropped to only $300. The effect of this has driven the citizens to become restless, and violent.
A Need for Bitcoin
Cryptocurrency is certainly an option for some in Lebanon who are using the cash that they can acquire to turn it into Bitcoin or USDT as a way to move capital out of the country. However, the use of digital assets, in this case, is not the final investment. Instead, it is more the method to move money across borders.
Cryptocurrency’s volume correlation in countries with struggling economies is getting hard to ignore. Venezuela has made many more headlines in the last year or two for its strife, and as such, Bitcoin trading volume has been through the roof. Lebanon is in a dangerous place, and its citizens are not only enraged but getting desperate, looking to Bitcoin and others to secure their finances.