Tuesday, November 30, 2021

Venezuela facing one of the most prolonged hyperinflation in history: Can Bitcoin save the country?

The Takeaway:

Venezuela continues to suffer from hyperinflation as a new report shows inflation hit 65.2% in August. The inflation rate is increasing at more than 50% every month. People in the country are turning to bitcoin to buy daily essential products. Around 3 million people left the country because of hyperinflation. Can bitcoin rescue the people from financial turmoil?

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Venezuela is facing an unprecedented inflation crisis. According to a National Assembly report, the inflation in Venezuela hit 65.2% last month. The country is experiencing a monthly inflation rate higher than 50%. There is no sign of hyperinflation slowing down in the country. Since Nicolás Maduro came into power, the political turmoil has fueled the hyperinflation by many times.

According to a BBC report, a cup of coffee costs 2,800 bolivars, which was just 0.75 bolivars a year ago. More than 3 million people have left the country as it became impossible for them to afford basic necessities to remain alive. The hyperinflation also caused the crime rate to go up in the country. As a result, people are turning to alternative currency such as Bitcoin to avoid Venezuelan bolivar.

 

Can Bitcoin save Venezuela?

Many people in the country are keeping their entire funds in bitcoin. And they are also using the leading cryptocurrency to buy daily essential products. The government is also looking to adopt an alternative currency as bolivar becomes nearly worthless. Nicolás Maduro decided to launch the government-backed cryptocurrency Petro to conduct international trade. US president earlier signed an executive order to ban the use of Petro in the United States. 

If the trend continues and hyperinflation remains on the rise till January 2020, it would become the 5th longest hyperinflation in the history after Ukraine, Azerbaijan, Greece, and Nicaragua. 

The situation in Venezuela can be used to explain how government-backed money can become worthless and leave people in crisis. Bitcoin, on the other hand, is decentralized and no one has control over it. Unlike printed currency, bitcoin is limited in existence which makes it gain more value as it grows. Venezuela is not the only country that is facing this crisis. Mass adoption of bitcoin can potentially solve these crises.

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Daniel Walker
Daniel Walker
Daniel is an experienced information technology analyst. He is a graduate from McGill University. When Daniel is not covering cryptocurrency and blockchain news, he loves talking to his dog.

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