- The demand for Bitcoin is growing in countries with weak economies such as Argentina or Venezuela.
- Venezuela has seen the largest increase in Bitcoin’s transaction volume in South America.
In the course of 2019, it was possible to see how certain regions of the world experienced increasing instability. Latin America, for example, has seen months of protests resulting from people’s economic discontent.
In Ecuador, Chile, Argentina and Venezuela, people took to the streets for different and complex reasons to demand change. Although the reality in each of these countries is unique, the name of a possible saviour is beginning to emerge in all of them: Bitcoin.
Bitcoin is an anchor in countries with weak economies
Of the countries mentioned above, Venezuela and Argentina have experienced a particularly difficult economic situation in recent years. Both countries have the highest inflation rates in the region and in the case of Venezuela the highest in the world.
Argentina’s political situation is undoubtedly one of the most important catalysts for the deterioration of its economy. In view of the political transition led by the newly elected President Alberto Fernández, the price of the Argentine peso is losing ground against the US dollar. The situation forced the current government to take extreme measures, such as reducing individual dollar purchases from 10000 to 200 US dollars.
Although it is a reasonable measure to prevent a further worsening of the crisis, this action is the focus of criticism of central governments by the crypto community. The restriction of economic freedom, the depreciation of the value of the national currency and the growing uncertainty about what will come after political change raise the question of what other alternatives are available.
Current developments show that Argentineans are using Bitcoin as an alternative to overcoming the crisis their country is going through. Bitcoin allows them to retain their freedom and decision on what they can spend their money on without having to limit the number of operations.
Bitcoin, Venezuela and the USA Sanctions
So it is no coincidence that something similar is happening in Venezuela. There, the crisis is more dramatic and worsening. This is precisely the reason that has led to greater acceptance and demand for Bitcoin.
CryptoWelso” emphasizes this in his Twitter account. In the following chart, the trader and analyst also shows how the increase in demand for Bitcoin corresponds to countries suffering from economic and political volatility:
Demand for #Bitcoin in economically volatile regions reached record highs in 2019.
Since 2013, volumes on Argentine peso, Hong Kong dollar, and Venezuelan bolivar bitcoin pairs have exceeded $600 billion in total value. pic.twitter.com/atKadtWjb3
— CryptoWelson 📊 (@CryptoWelson) November 1, 2019
The collapse of the Venezuelan economy, as can be seen in the graph, is inversely proportional to the transactions in Bitcoin. Venezuela has the highest transaction volume of Bitcoin in the region and reached a record level in October, which corresponds to the level of the crisis.
During this period, the Central Bank of Venezuela published figures confirming the level of the economic downturn: In the first quarter of 2019, GDP shrank by 23% and the oil sector, which accounts for most of the foreign currency imported into the country, by 19%.
Overall, BCV (Central Bank of Venezuela) figures estimate the collapse of the Venezuelan economy since 2014 at 63%. The figures also show how the economic downturn preceded the US sanctions.
The government has tried to introduce a cryptocurrency, the so-called “Pedro”, which is managed by the country’s central bank. The Pedro serves as a unit of account anchored to the national oil reserves and can serve as an alternative for citizens to buy, save and carry out transactions in currencies such as the dollar or the euro. So far, the measure appears to be ineffective, probably because the “Petro” lacks all the advantages of Bitcoin (transparency, decentralisation, freedom and trust).
The volatile price of Bitcoin
Bitcoin’s rising price could be caused by this increase in demand. At the time of writing it was $9,141.01 with a loss of -1.80% in the last 24 hours.