Years of hyperinflation of the Venezuelan bolivar has made the currency nearly unusable. Over the past 12 months, bitcoin has taken over the country as the main currency and residents have been utilizing the cryptocurrency to purchase basic goods, medicine, and other vital products.
Patricia Laya, the Venezuelan Bureau Chief at Bloomberg, recently revealed that the daily limit of local bank ATMs is set at 5,000 bolivars, worth around $0.05. Laya stated that she had waited 20 minutes in line to obtain $0.05 in hyperinflated currency worth little to no value.
Spent around 20 minutes in line at the ATM this morning to get a max of 5,000 Bolivars. That's about $0.05 pic.twitter.com/F1SxEruhcj
— Patricia Laya (@PattyLaya) December 7, 2017
Due to the shortage of cash and the rapid decline in the value of the Venezuelan bolivar, local residents have begun to explore other methods of payments and currencies since the beginning of 2017. Because the value of cash has plummeted and local residents, businesses, and professionals have already rejected the currency, the vast majority of the population began to rely on alternative forms of money.
Throughout this year, the popularity of bitcoin within Venezuela has surged, as a rapidly increasing number of people have started to utilize the cryptocurrency as the main currency, medium of exchange, and store of value.
In an interview with the Associated Press, Venezuelan resident John Villar stated that he has bought two plane tickets to Colombia, his wife’s medication, and paid his employees with bitcoin in the past month. Villar emphasized that he intends to continue utilizing bitcoin like the majority of Venezuelans.
“This is not a matter of politics. This is a matter of survival,” said Villar.
At the current state, it is nearly impossible to purchase any good or service in Venezuela with the Venezuelan bolivar, given its low value and adoption rate. In fact, the value of the Venezuelan bolivar has plunged to a point in which protesters have started to burn the national currency because it costs less than paper.
In the mid-term, Venezuela may be the first case in which bitcoin takes over a fiat currency system as the country’s main currency and financial system.
Why Bitcoin?
In Venezuela, the majority of the population and general consumers have lost trust in the government, central bank, and commercial banks. Its currency its nearly broken and its value has plunged to a point in which goods and services can no longer be purchased with it.
Bitcoin is a decentralized and peer-to-peer currency system, store of value, and safe haven asset that demonstrates a trustless ecosystem. Anyone within the network can send and receive payments from each other on a peer-to-peer basis, without the involvement of intermediaries.
In the future, bitcoin will likely emerge as the major substitute and alternative to declining fiat currencies. In the long-term, bitcoin could replace reserve currencies and multi-trillion dollar fiat currencies like the US dollar, Japanese yen, and Chinese yuan, if it sustains its current growth rate and exponential increase in value.