Venezuela growing economic crisis
Bitcoin Analysis: Point of no return:
The International Monetary Fund projects that Venezuela will face a dire recession in 2016. The contraction has been 8% which surpasses the 5.7% reduction in 2015. The prediction is that the inflation will rise by 500% in 2016 and might hit 1000% in 2017. The real problem started with the installation of a Socialistic regime in 1999. Henceforth, the country hasn’t been able to produce food and other commodities sufficient for self-sustenance. On the other hand, the Government has been taking control of major companies in private sector and providing very less for the workers and population. Venezuelan government has been imposing unpopular measures to help the economy recover with disastrous results ever since. Nevertheless the situation has been deteriorating and the country is led down the spiral of Hyper-inflation.
Bitcoin as an alternative:
With the country’s economy being asphyxiated by various other factors, Bitcoin can be an escape hatch for its citizens. The devaluation of its currency, Bolivar and strict capital controls which prevent people from converting into other currencies has become the brunt of the problem. Converting the local currency into stronger currencies like US dollar, Euro or even Columbian Peso is being restricted. The status of Bitcoin is unclear in Venezuela with authorities treating Bitcoin more as property than currency. This offers more benefit than the strong fiat currencies. It can be used to purchase goods online, send and receive money and act as store of value. More businesses in the same line would also provide better employment opportunities.
People’s acceptance:
Venezuela has recently set a new bitcoin transaction volume record, which has seen exponential growth since the start of 2016. Bitcoin trading volume in the first week of August has reached 141,744,733 bolivars (about $141,000 USD), outperforming the previous week’s record of 117,116,539 bolivars (about $117,000).
With the country’s inflation rate sitting over 500%, people have already started to take up Bitcoin as alternative. What crucial role this cryptocurrency has to play in restructuring Venezuela’s economy is to be seen.
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