The Plague of InflationInflation is usually a product of printing new money, which is done by central banks. At the same time, inflation is a mechanism of devaluing everyone’s current money balances. The new money that was printed is initially distributed to government agencies and entities with immediate ties to institutions. The result is that only people close to the money faucet can reap the benefits of the new supply of money, as well as increased liquidity and investment potential. By the time the spill effect of the new money reaches the middle and lower class, the economy will already have adjusted, and businesses will have increased prices for products and services. As such, the majority of the citizens will have little to no benefit from the issuance of new money. Still, their money balance was heavily devalued via the fresh supply of money. This is what happens in hyperinflationary countries, but at an accelerated rate. Not to say that first world countries are shielded from this as it is the same system, only with stricter control of the inflation. International currencies like the U.S. dollar, Euro, or the Swiss Franc are known to be investment havens for countries with unstable monetary systems.
South America Flocks to BitcoinWith the emergence of Bitcoin as a potential worldwide currency, the first countries to benefit from its high store-of-value potential will be the hyper-inflationary ones. This is increasingly the trend that can be observed in South American countries. Venezuela has seen an astronomic increase in Bitcoin buying activity when the local currency started to inflate out of control, other South American countries have followed in its footsteps.
Volume for Bitcoin transactions on the LocalBitcoins platform has been steadily increasing in the past months, reaching all-time highs. Most importantly, the increase in volume is not only visible in the local currency but also in the USD denomination. This highlights how much the demand for Bitcoin has increased in the region. While countries with unstable currencies need the most access to a store-of-value currency, corrupt governments will try their best to limit access to Bitcoin or use more sophisticated tactics like the release of the Petro dollar in Venezuela.
Bitcoin volume in South American hitting ATHs (Localbitcoin) pic.twitter.com/oUAu1bRBn3— Dan Held (@danheld) January 21, 2019
Bitcoin’s HavenLuckily, Bitcoin is designed to be accessible to anyone and the decentralized nature of the Bitcoin phenomenon ensures everyone has access to the network. A major role in enabling free trade and access to it is the peer-to-peer platform LocalBitcoins. Governments can try to introduce restrictions or limit access, however, Bitcoin is not only a decentralized piece of software but also a social movement towards freedom of financial choice. [bctt tweet=”For many, Bitcoin might become the only way to safeguard their wealth from disappearing due to poor monetary policies from an incompetent or corrupt government institution.” username=”beincrypto”] Hence the major adoption wave might be sparked in the countries whose citizens might not have a choice but to believe in Bitcoin’s value proposition. Will cryptocurrency adoption begin in countries with unstable currencies? Are the increased volume numbers a sign of what is yet to come, or just a temporary haven until the hyperinflation is dealt with? Tell us your thoughts in the comments below!
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