Research by Matt Alhborg, data scientist and researcher at dlab.vc during a blackout in Venezuela reveals how Venezuela dominates the crypto scene is South America. It also suggests that Bitcoin is mainly used as the “bridge currency” between the US dollar and local currencies.
The blackout occurred on March 7, with which economic activity across the country stopped for several days. In the midst of this incident, Alhborg observes a drastic drop in the volume of bitcoin and crypto exchanges in Venezuela, which is quite obvious.
However, we also note that with Venezuela, the drop was also surprisingly equivalent in other Latin American countries. It trades with the Argentine, Chilean and Mexican peso with Peruvian soil. It shows Venezuela’s dominance on the continent when it comes to cryptocurrency trading.
Therefore, he notes that Bitcoin acts as a currency across South America.
Dollarize Latin America
Most Latin currencies, particularly the Argentine peso and the Venezuelan bolivar, suffer from hyperinflation. Therefore, an income of $ 10 today could become the equivalent of $ 5 in a month or even a week. Therefore, holding savings in Bolivar is impossible.
While one might think Bitcoin is the choice for Store of Value (SoV), it is actually the U.S. dollar, Chinese yuan and other stable FIAT currencies in high demand.
Nic Carter, the founder of Coinmetrics tweeted,
Venezuela is not “Bitcoinizing”. It’s good to admit it. Bitcoin is mainly a wholesale network used by sophisticated brokers to facilitate the flow of currency in the country, dollars being in great demand.
It is dollarized via Bitcoin.
The exchange rates in these countries are extremely high for the workable operations of money issuers. Therefore, locals have to resort to informal sites like localbitcoin.com to convert Bitcoin to Bolivar and vice versa.
This is again used to exchange for other currencies across the continent. It has contributed to the seamless transfer of funds from other Latin American and developed country countries by Venezuelan workers.
In addition, he also notes that with the gradual economic changes in the country, the volume of Bitcoin trading is decreasing. Alhborg notes,
Along with this change in the situation on the ground in Venezuela, there has also been a gradual reduction in Bitcoin-bolivar trade on LocalBitcoins.
When do you think Bitcoin will start acting as a true value store (SoV) around the world? Please share your views with us.
Coingape is committed to the highest standards of journalism, and therefore adheres to a strict editorial policy. While CoinGape takes all measures to ensure that the facts presented in its press articles are accurate.
The views, opinions, positions or strategies expressed by the authors and those providing comments are their own, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.