• Skip to content
  • Skip to secondary menu
  • Skip to primary sidebar

Strategic Capitalist

Hard hitting news and analysis for the venture space in multiple industries.

  • Home
  • Cannabis
  • Oil & Gas
  • Crypto
  • Politics & War
  • Income

Crushing inflation drives spectacular growth in cryptocurrencies

September 22, 2018 by admin Leave a Comment

From Eric Wade, Analyst, Stansberry Churchouse Research:

Plagued with hyperinflation, an incredible 90 percent of the population of Venezuela is now under the poverty line. That’s compared to a still-extraordinary 48 percent just four years ago.

So many children are malnourished and adults are going hungry that Venezuelans have coined a term for it. They call it “The Maduro Diet”, in honour of President Nicolás Maduro’s failed economic policies.

Annualised inflation in Venezuela is now running around 1,000,000 percent. A year ago, you could get a cup of coffee for 0.05 bolivars, the country’s currency. Today, that same cup of coffee would cost 3.5 million bolivars… at least, it would if the government hadn’t re-denominated the bolivar by arbitrarily lopping five zeros off the end of it last month. Under the re-denomination, a cup of coffee still sets you back 35 bolivars. That’s a price hike of nearly 70,000 percent (or 7,000,000 percent before the re-denomination).

In most of the rest of the world, inflation of 15 percent (in the U.S. in the late 1970s, for example) is considered nosebleed catastrophic. A million percent is pretty much beyond belief. (We talked about this last year.)

So people in Venezuela are looking for places to store value. Cryptocurrencies are a clear and attractive alternative.

That’s why Maduro announced in February that Venezuela would be launching its own national cryptocurrency, called the Petro. Pegged to the price of oil, the Venezuelan government says it will begin pricing salaries in Petro, and requiring banks to process it.

It’s unclear whether the Petro is actually under development. It may have just been a scheme for the government to raise money. Regardless, cryptocurrency is legal in Venezuela, and while the government isn’t actively encouraging people to use it, it’s not discouraging them from using it, either.

That’s been a boon for bitcoin, and a competing cryptocurrency called Dash.

Crypto to the rescue

Born during the height of the global financial crisis, bitcoin was a direct reaction to the rampant money printing and bank bailouts that happened around the world in 2008-2009. Not only is it the world’s first currency that’s not controlled by any one entity, it’s also anti-inflationary. There will only ever be 21 million bitcoin in existence. So while the supply of national currencies can be inflated with a few waves of a central banker’s hand, bitcoin is designed to hold its value. No amount of political wrangling or currency manipulation can change that.

In countries with stable currencies, the benefits of cryptocurrency may seem abstract. In places like Turkey where the national currency, the lira, is plummeting, residents have quickly adapted. Now, cryptocurrency adoption in Turkey is among the highest in the world, at 18 percent of the population.

And in Venezuela, a non-inflationary currency isn’t just nice to have – it could literally mean the difference between life and death. That has Venezuelans flocking to bitcoin.

There isn’t a perfect way to measure the actual adoption rate, but we can look to places like Localbitcoins.com for an indication of the trend. The Localbitcoins exchange connects bitcoin buyers and sellers around the world who can then meet up in person to swap local currency for bitcoin.

In 2017, Localbitcoins’ trading volume in Venezuela was more than 21,500 bitcoin. Bitcoin’s price averaged US$4,127 in 2017. That means some US$88 million worth of bitcoin changed hands in face-to-face transactions in Venezuela that year alone. That doesn’t include bitcoin traded by Venezuelans on online exchanges.

Click here to continue reading at TheCrux.com… 

This article originally appeared at Stansberry Churchouse. 

Filed Under: Crypto, Featured

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Recent Posts

  • Should You Invest Your Social Security Income Into the Stock Market?
  • How to Trade Options for Income in Your IRA
  • Now is the Time to Invest in Marijuana Stocks
  • Wall Street’s Marijuana Madness: ‘It’s Like the Internet in 1997’
  • $100 Oil Isn’t as Outlandish as You Might Think

Copyright © 2023 · Magazine Pro on Genesis Framework · WordPress · Log in