How Venezuelans Are Surviving Hyperinflation with Cryptocurrencies
With the crisis in their country showing no signs of abating there looks to be no end in sight to the suffering of ordinary Venezuelans.
With shortages of food and medicine, a breakdown of law and order and rumours circulating about the alleged mistreatment of political prisoners at the hands of the regime, life in the embattled country has become a gruelling struggle. Ever since the collapse in oil prices wrecked the South American country’s fragile economy, the government of President Nicholás Maduro has responded with ever-more authoritarian measures in a bid to cling on to power. Violence, hunger and despair have followed in their wake.
To add to the misery, the IMF is predicting that the rate of inflation could rise to as much as 1,600%, making it even harder for Venezuelans to obtain vital goods and services. Hyperinflation is already so bad that one Twitter user recently pointed out that the bolivar is worth less on the black market than the tokens used in the online game World of Warcraft.
Venezuelans Trust in Crypto
With the situation so dire, it is small wonder that people are grasping at whatever opportunities they can to ease the burden and one ray of light on the horizon could be cryptocurrencies.
Increasingly, Venezuelans have begun a large-scale mining of bitcoins as a way of generating income. Aided by high prices for bitcoins and low energy costs (power being about the only affordable commodity left in the country) people from across the social spectrum have been turning to this new way to make a living.
Because Bitcoin and other cryptocurrencies are unregulated by any government or financial institution, they are immune from local crises that can cripple economies like Venezuela’s. Although their prices have seen massive fluctuations in recent weeks, their values remain high. With the bolivar as good as worthless, they are providing Venezuelans with just about their only viable alternative.
The bitcoins mined are being used to purchase goods over the internet which can then be shipped (usually from abroad) to those who need them. With shelves in the country’s supermarkets stripped bare, this is for many the only access they have to food and other vital goods.
As well as mining bitcoins, Venezuelans are also engaged in heavy peer-to-peer trading with sites such as Localbitcoins reporting a surge of activity. Crucially, trading in bitcoins has not yet been clamped down on by the government, although mining of them has. And it’s not just Bitcoin providing many with a lifeline – Ethereum is also proving popular, being easier to mine and potentially more profitable.
A World Wide Solution
This reflects trends elsewhere as well. Although not mired in crisis like Venezuela, South Korea has seen a massive uptake in cryptocurrency trading, as uncertainty and fear bred by North Korea’s standoff with the United States leaves investors wary of more traditional assets. Coupled with what is being seen in Venezuela, it is clear that cryptocurrencies are becoming an increasingly viable alternative to the status quo in an uncertain world.
Finally, it is easy to forget that many millions of people across the world do not have access to even the most basic of banking services – something we take for granted. To use cryptocurrencies all that is needed is a smartphone and an internet connection – both much more widely available.
Free from regulation or manipulation by governments and the world’s financial institutions which have so badly served many of the poorest people on earth, cryptocurrencies are a new, democratised lifeline to those most sorely in need of one.
Featured Image via Fotolia
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.