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Venezuela is the first country with a Fiat currency crisis at a time when Bitcoin is a real option

TL:DR. When the government is guaranteed to rob you each and every day, it is worth taking bit of risk to exchange Fiat to Bitcoin in a dark alley using LocalBitcoins

This is an update to the chapter in The Blockchain Economy digital book entitled: Some Governments Want To Shut Down Bitcoin But They Don’t Know How.

This post covers

 

 

 

 

Hyperinflation robbery is not just yesterday’s news

Yes inflation is robbery. If it is still $1 it may sound good, but not if $1 buys what used to cost 10c.

There are 3 types of inflation:

 

 

Many countries have had hyperinflation – think Zimbabwe recently and Weimar Germany in the 1930s. Venezuela is the first country to suffer hyperinflation when Bitcoin is a real option (and is also a much bigger economy than Zimbabwe).

Watch what real people do, ignore governments flailing around.

Before Bitcoin, the classic policy response of a country with hyperinflation was to peg the local currency to USD. This is less of an option today for two reasons:

After Bitcoin, the policy response includes creating a Fiat Coin. The more formal name is Central Bank Digital Currency (CBDC), meaning Central Bank determines monetary policy but that currency is traded like Bitcoin.  This is lipstick on a pig. Fiat Coins are still not sound money, even if they sound cool and modern and give some incremental efficiency gains by using Blockchain.

Ignore these governments flailing around; that is not where the action is. Instead watch real people use Bitcoin to solve real problems in their lives. Those of us living in countries with a stable Fiat currency can only imagine the desperation caused by hyperinflation. If you think buying some Bitcoin will help feed you and your family, then buying some Bitcoin will get onto your Must Do Today A List.

The reality for the people is that if feeding you and your family is your concern, black market USD looks as good as black market Bitcoin. So people will use both. What is new is that Bitcoin is now an option alongside the USD.

BTW, “black market” is a pejorative term that only carries moral weight if the government is doing the right things for its citizens. Governments that allow hyperinflation forego such respect.

Exchanging Fiat to Bitcoin in a dark alley using LocalBitcoins sounds scary unless the alternative is worse

These traction numbers (from CoinDance) are enough to to make investors salivate. Data about Venezuelans trading in bolívar for Bitcoin on the LocalBitcoins exchange looks like a classic hockey stick – but this is not a business plan projection, this is actuals. 

 

I have never used LocalBitcoins, because it sounds a bit scary to my spoiled way of thinking. You can get robbed (before or after the transaction) and I am fortunate to have other safer options. If you live in a stable country you have two much safer alternatives:

Bitcoin vs Altcoins in the market laboratory of Venezuela

Venezuela is where some Altcoins will either emerge triumphant or be trampled by the growing might of Bitcoin.

Altcoins such as BitcoinCash (BCH) and Dash claim to be better than Bitcoin (BTC) for regular spending.  Venezuela is the market laboratory where we will soon know if this true. The market verdict is not yet out but early indications are:

 

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Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

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