When it comes to the historical issues with central banking, inflation is usually mentioned before anything else. There have been many instances of governments destroying the general public’s savings throughout history, and it is happening again in Venezuela. Although the last official numbers from the Venezuelan Government were published in December, Economist Steve Hanke of the Troubled Currencies Project currently estimates the country’s annual inflation rate at 750%.
Addings Zeroes to Keep Up with Inflation
With inflation running rampant, one would think the government may want to alter the supply of currency throughout the country. Not in Venezuela. It appears that the plan is now to simply add more zeroes to the newly printed paper bills that will come out next year. Venezuela’s largest bill, the 100-bolivar note, is currently worth the equivalent of $0.14. According to Bloomberg, the new bills are rumored to be 500 and 1,000-bolivar notes. The high demand for large bills has reportedly led to shortages at some bank ATMs, which makes it even more difficult to purchase everyday items throughout the country.
Using Bitcoin to Escape the Bolivar
Many in the Bitcoin community believe that Venezuelans should turn to the peer-to-peer digital cash system for help, but the opportunities involved with holding bitcoin (the digital asset) are not clear. It’s likely that many Venezuelans would prefer to use Bitcoin as an escape to other currencies rather than relying on another asset that has been wildly unstable since its inception in 2009. Buying bitcoin locally and then depositing it into a Coinapult wallet locked to US dollars or euros could be an attractive option for individuals who are usually limited in their foreign currency options.
Bitcoin has served as a much better store of value than the Venezuelan bolivar in 2015, although the volatility associated with each asset is quite similar:
Interest in Bitcoin on the Rise
The usage of Bitcoin in Venezuela can be difficult to track, but interest in the digital payment system and commodity is certainly on the rise. The frequency of “Bitcoin” as a search term on Google has more than doubled over the course of 2015 in Venezuela, and it has quadrupled since November:
Activity on Surbitcoin, the only Venezuelan bitcoin exchange, remains low, although the 24-hour volume did recently spike to 256 bitcoins. Venezuela should be one of the more interesting countries to watch in terms of Bitcoin adoption over the next few years. At the very least, Bitcoin could potentially provide an escape from the destructive monetary policy and economic restrictions found in the country.