Last week, Bitcoin broke another record in terms of trading volume in Venezuela. The latest spike confirms that Venezuelans choose Bitcoin instead of their national currency as a store of value amidst shocking hyperinflation and rising political uncertainty.
Over the past weeks, peer-to-peer (P2P) trading volumes for Bitcoin (BTC) on LocalBitcoins have seen a sharp increase as a direct result of the ongoing crisis in Venezuela. Last week was particularly noteworthy as it witnessed a dramatic spike, with volume nearly reaching 2,500 on LocalBitcoins — a new record.
Measured in bitcoins, the weekly volume achieved a new all-time high of 2485 — equivalent to almost nine million USD. Trading volumes on Venezuela’s P2P Bitcoin market currently exceed the volumes of the country’s largest stock exchange by 157 times.
It should also be noted that LocalBitcoins volumes represent just a small part of total BTC trades performed by Venezuelans, who also use services offered by centralized exchanges in neighboring Colombia and Brazil.
Apart from the economic collapse, there’s another factor bolstering such a spike. Venezuela has recently introduced a regulatory framework for the cryptocurrency industry which legalizes cryptocurrencies in the country.
Blessing in Disguise
The rising interest in digital assets has primarily been driven by the current economic and political situation in Venezuela. Since the end of 2013, the economy of the oil-rich country has contracted by 47percent while inflation has soared to over one million percent. US sanctions and an ongoing presidential crisis have exacerbated the downturn. These developments resulted in a high degree of uncertainty and the dramatic depreciation of the local fiat currency, the Venezuelan bolivar.
[bctt tweet=”Venezuelans have been forced to search for alternative ways to secure their wealth. Seemingly, Bitcoin has become the asset of choice as a store of value.” username=”beincrypto”]
Electricity in Venezuela is very cheap, which makes mining extremely cost-effective. This provides people with a way to overcome the current shortage of food and medicine, as they may mine the digital currency and use it to order the delivery of necessary goods.
Will it last?
The Venezuelan story proves that citizens of countries with collapsing economies and depreciating local currencies are interested in diverting their wealth to digital currencies as an alternative form of currency.
What is more, Juan Guaidó, the opposition leader and self-proclaimed president of Venezuela, is an old Bitcoin supporter. In past tweets, he welcomed the opening of the first cryptocurrency exchange in the country.
If Nicolás Maduro eventually steps down and a new administration takes office, the situation might change. If new authorities succeed in bolstering the national currency and economy, we could feasibly see a dramatic decrease in bitcoin trading volume. However, for now, Bitcoin remains a lifeline for many Venezuelans in dire straits.
Do you believe Bitcoin has come to Venezuela to stay or is it just temporary relief? Let us know what you think in the comments below!