As the economic crisis in Venezuela worsens leading to a growing exodus of citizens out of the country, the demand for bitcoin and other cryptocurrencies has exploded.
According to Coin Dance, Venezuelans traded bitcoins worth nearly 300 million bolivars last week and the record could be broken again as so far this week bitcoin worth more than 292 million bolivars has already been traded. This is in continuation of a trend on the BTC/VES pair that began earlier in the year.
The worsening economic conditions have resulted in reports of Venezuelans fleeing the country in large numbers on foot and by bus after finding life intolerable in the socialist country. Per statistics from the International Organization for Migration, since 2015 around 1.6 million have fled and the number is still rising. Most of them have fled to other South American countries such as Colombia, Peru, Brazil and Argentina.
Besides an increase in demand for bitcoins as a hedge against the high inflationary conditions in the country, part of the reason for the record trading volumes in the BTC/VES pair has to do with the devaluation of the currency a few weeks ago. On August 10, five zeros were stripped off from the country’s currency after inflation levels that had risen to stratospheric levels, as CCN reported. However, this seems not to have solved matters as already the inflation rate is estimated to have reached a 100% even though the ‘new’ Venezuelan currency is less than two months old, per Bloomberg.
Other than devaluing the currency by 95% and renaming it the sovereign bolivar, Venezuelan president Nicolas Maduro also announced that the bolivar would be pegged to the Petro cryptocurrency which was unveiled earlier in the year. This was in the hopes of circumventing sanctions and gaining access to international finance besides bringing the persistent hyperinflation under control.
Adoption of the petro cryptocurrency has, however, been low amidst wide skepticism with some questioning whether it exists at all. Despite this the government has soldiered on making efforts to boost the cryptocurrency by, for instance, decreeing that it would be the official currency of Petróleos de Venezuela, S.A. (PDVSA), the state oil company. Maduro has also pushed for the Petro to become the second unit of account, as CCN reported in late August.
“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the petro,” Maduro remarked on national television. “It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”