Bitcoin is continuing to fulfill its role as a stand-in currency in third world countries right now. It was recently reported that weekly trading of Bitcoin on peer-to-peer platforms in Argentina and Venezuela have hit an all-time high.
The top P2P trading platform for Bitcoin in these countries is LocalBitcoins, and data collected by CoinDance shows that trading in terms of Argentinian pesos and Venezuelan bolivars peaked in the week ending December 21st.
The numbers remain insignificant in the overall scheme of global macroeconomic flows ($540K in Argentina and $24.8 million in Venezuela), but it is what they signal that matters. With trading volumes continuing to increase this year, it seems that many residents of these countries are looking for ways to circumvent central bank policies now.
All-Time Trading Highs
For example, Argentina recently announced its intention to increase the peso’s monetary supply by 2.5% per month for the next two months. This would clearly cause a significant amount of inflation, which says nothing about the insane amounts of inflation occurring in Venezuela right now.
Argentina has tried to prevent purchases of Bitcoin by limiting users’ ability to use credit cards to buy it, and by putting a maximum of $200 per month on purchases. These attempts to control the flow of capital make an even stronger case for Bitcoin’s necessity in the coming months since the cryptocurrency is all about being a sovereign entity.
Interestingly enough, Venezuela has taken a very different tact with cryptocurrency and is actually rumored to hold Bitcoin and Ethereum in their reserves. This move seems to be a contrarian bet to help bolster their international reserves, which have dropped significantly since their economic crisis began.
Economic Implications
One might wonder what is causing this spike. South America has recently hit a period of political (and economic) unrest as several massive shifts are underway. There has been a food crisis in some countries, and this year alone has seen massive political unrest in Ecuador, Bolivia, and Venezuela. Argentina is going through an economic shift, and Brazil has become much more dangerous. All of this contributes to instability in the continent, and for citizens, this means a lack of certainty regarding their economic future.
Bitcoin may be a bandaid solution that will only serve some citizens. Even if they are able to escape the capital controls preventing them from purchasing Bitcoin, they still need to find ways to spend it, and that infrastructure isn’t currently in place.