Tag: inflation

Inflation is a very real problem in specific parts of the world. In most cases, once there is a specific level of inflation, there is very little one can do about it. Hardly anyone will be surprised to find out the top countries are all located in either South America or Africa. Bitcoin could make a significant impact in all of these countries over the next few weeks, that much is certain.

6. Ethiopia

Ethiopia is a country where inflation has been running rampant for quite some time. It is also a country where internet access is almost more expensive than renting a small flat. No one will be surprised to learn the inflation rate is sitting at 23% as of 2012, albeit it is expected that number has increased significantly ever since. African countries have been dealing with inflation for several years now and there is no end in sight.

5. Sudan

Sudan is an interesting region that most people know by its official designation as “North Sudan”. Even though Sudan is Africa’s third-largest country, it is not as prosperous as some might expect. Ever since the civil war caused the country to split in two, inflation rates have gone up quite a bit. The latest official numbers put the rate of inflation at 32%, albeit it may have gotten much worse over the past few years.

4. Syria

The country of Syria has gotten a very bad reputation over the past few years, due to its ties with ISIL training camps. A lot of people who are looking to fight in this “Holy War” end up going to Syria before they can become an official Jihadi. Syria is also dealing with the world’s 4th highest inflation rate. In 2012, the rate was 37%, albeit the past few years have certainly bumped that number up quite a bit.

3. Argentina

With two South American countries in the top 3, it is more than evident something will need to change in the region. As of November 2016, the inflation rate in Argentina is 41%. That is a lot lower than most people may think, yet it still means things are ridiculously expensive right now. Bitcoin has been making minor inroads in the country so far, albeit there is still a very long way to go before the popular cryptocurrency becomes a mainstream trend.

2. South Sudan

It is somewhat unusual to see the Southern part of Sudan suffer from a higher inflation rate than its Northern part. Then again, South Sudan became independent as of 2011 and the country has had to battle a lot of issues ever since. With inflation sitting at 79%, the situation is looking borderline hopeless right now. Moreover, the region’s total debt accumulation figures remain unclear even to this day.

1. Venezuela

No one should be surprised to see Venezuela being the “winner” when it comes to national inflation rates. It has to be said, Venezuela is in a league of its own in this regard. Official numbers project an 800% inflation rate for the country, a number that is expected to nearly double in the coming year. The country is not too keen on bitcoin and more specifically, those who mine it. Several arrests have been made throughout the years, all of which relate to bitcoin mining activity.

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The ability of Bitcoin to resist inflation makes it an automatic safe haven for embattled economies like Venezuela’s and Nigeria’s.

The leading Bitcoin exchange in Venezuela, SurBitcoin has announced a temporary suspension of its service. The disruption of service, happening for the second time in less than a year is due to the refusal of its banking partner to continue offering banking services. SurBitcoin had issued a notice to all its customers asking them to … Continue reading SurBitcoin Suspends Services for the Second Time in One Year

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Bitcoin has emerged as a savior for many in dire situations. The decentralized nature of Bitcoin, combined with its ease of use and secure nature makes it an ideal alternative for those in troubled economies or cut off from the traditional financial system. The economic condition of Venezuela and Bitcoin’s increasing adoption in the country … Continue reading Bitcoin for Troubled Economies, the Venezuela Example

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Some people have been wondering if buying bitcoin is a solution to avoid inflation plaguing their country. While it is true bitcoin can be used as a hedge against fiat currency volatility, it works very differently from inflationary currencies. Bitcoin has no inflation model, yet it is not recognized as a legal tender by most governments either. Bitcoin can protect against inflation and hyperinflation, assuming the demand keeps up.

Bitcoin Versus Inflationary Currencies

The concept of inflation is not difficult to explain. There are two different causes for inflation: a currency has a rising supply, or there is far less demand for said currency. In both cases, more currency will come into circulation, which eventually means the prices for goods and services will – in most cases – go up. In the world of national currencies, inflation is usually caused by central banks who continue to print new bills, effectively creating money out of thin air.

In the traditional sense, Bitcoin is not subject to inflation, as there will only be 21 million coins. That has been hardcoded mathematically into the Bitcoin source code. However, there is a caveat, as the demand for bitcoin can wane over time which would cause a certain form of inflation. It would be very difficult to defend against such a development unless a few people decide to buy up the “excess” supply immediately.

Moreover, while bitcoin cannot be counterfeit or manufactured infinitely, the value per coin can still go down. As unlikely as it may sound to see Bitcoin go back to US$1 per coin or less, it is an option that should be dismissed easily. Should the number of freshly minted coins outweigh the growth of saving and trading BTC, things could get dicey very fast. This is part of the reason why bitcoin mining has block reward halvings.

Assuming the demand for bitcoin keeps up with current levels, cryptocurrency is a valid hedge against inflation. That being said, bitcoin will need to be adopted by more people to keep the momentum going. Once countries start to deem bitcoin legal tender, things will start to look very bright. At the same time, it is equally possible bitcoin will become “less appealing” to the masses, and people will stop using it altogether. Once again, highly unlikely, but it is not impossible either.

People looking to buy Bitcoin as a hedge against inflation have their homework cut out for them. If they feel bitcoin will not go anywhere in terms of mainstream adoption, there is little point in buying BTC to begin with. Finding the right balance between hedging against inflation and hoping Bitcoin goes mainstream is not an easy feat. Considering how the bitcoin ecosystem is still only eight years old, it is difficult to tell what will happen in the future.

In the end, buying Bitcoin has a very good chance to protect users against fiat currency inflation. However, one should not hedge against inflation with Bitcoin and hope to become rich overnight in the process. It is plausible the BTC price will continue to appreciate over time, but it will take many more years for that to happen. Right now, buying bitcoin as a hedge against inflation is risky, but the risk is no bigger than buying any other asset, currency, or investment vehicle.

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The financial situation in Venezuela continues to go from bad to worse. Just last week, the government announced a new 20,000 bolivar bill to reduce the existing bank note supply. A new law will replace the current highest-denomination banknotes with coins in the following 72 hours. A similar strategy has been employed in India, which … Continue reading Venezuela To Invalidate 100 Bolivar Banknote In The Next 72 Hours

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Whether you agree with Donald Trump’s politics or not, you have to admit he’s done wonders for bitcoin. Following the election results, trading skyrocketed on platforms ranging from ZebPay to Digital Currency Group. Saurabh Agrawal, co-founder of ZebPay explained, “There has been a spike in volumes of bitcoin trading by about 20 percent, and even … Continue reading Will Bitcoin Reach $2,000 During Trump’s Presidency?

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Dictatorship, devaluation, hyperinflation, drama. Those are just a few words to label what’s going on in Venezuela. The country, formerly described as a “socialist paradise” by the leftists in the region, is now facing the consequences of eighteen years of fiscal irresponsibility and production decay.  The government has seized key industries.

But what prompted this disaster? Many people talk about the decay of oil prices, which comprises 98% of Venezuela’s exports, but that just doesn’t cut it. The administration is a conglomerate of public companies all suffering from the same illness; they are just a money sinkhole with no real turnover of profit or social benefits. Even PDVSA (the national oil company) was forced to invest in a chain of regulated food groceries stores. No wonder that the oil production fell 1 million of barrels per day!

Before Chávez started its mandate, PDVSA produced 3 million barrels of oil per day with a payroll of 40,000 employees. Now the company has 120,000 workers and is producing 2 million. This and the fact that the country’s central bank is everything but independent, are major ingredients for the “perfect storm“ that was unleashed after oil prices began to fall.

The Venezuelan Bolivar (VEF) plummeted by 24% in just 24 hours, amounting to a 400% loss in just two months. In Venezuela, the divulgation of the black market rate (the one used to price nearly all imports and goods) is prohibited by law.  However, millions of Venezuelans use the website DolarToday as a reference of the foreign currency price. The country’s main ISP, which happens to be government owned, went so far as to outright block access to the website, with other internet providers doing the same.

Bitcoin’s benefits are an often discussed topic among the currency adopters. However, few are the countries where the cryptocurrency has actual, practical uses, and Venezuela is one of those.

The statistics are overwhelming; Venezuelan citizens don’t hold savings accounts nor do they have a ‘savings culture’. Such behavior is explained by the economic crisis the citizens have endured over the last years.

Bitcoin became a miracle among tech-savvy people in the country, but now the user base has substantially increased, and ninclude businessmen, merchants, high-net-worth individuals, and freelancers.

The Bitcoin trading volume has been slowly growing in the past weeks, amounting to 87 BTC per day in LocalBitcoins and Surbitcoin markets, combined. Additionally, the bitcoin price has seen a 300% increase in merely two months–crazy figures in a crazy country.

Bitcoin price rose in its top African market this week, experts expect Venezuela to follow with its projected 1,500% inflation.

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Venezuela, the South American country famous for its cheap gas (fuel) prices, has experienced a surge in both Bitcoin volume and price.

The country is in the middle of the worst economic crisis ever seen in its recent history. According to the Venezuelan consulting firm, Ecoanalítica, the country’s annualized inflation reached the 1.108% mark.

The Venezuelan government has unofficially banned the country’s central bank (BCV) from releasing economic indicators such as inflation figures and price indexes. After much pressure from banks, consulting firms, and other institutions, the BCV reported an 180.9 percent inflation for last year.

Consulting firm, Econoanalítica, criticized the methodology used by the BCV to calculate inflation. BCV altered the weight of several goods and services used to “embellish” the figure.

Amidst this grim landscape, bitcoin has gone through highs and lows. In Venezuela Bitcoin and other currencies prices are calculated using the unofficial black market rate. Traditionally, a website named Dolar Today has been used as the country’s market reference. However, its rate has slowly lagged behind. In consequence, many OTC transactions between private financial entities and individuals have ignored the 1,092 VEF/USD rate.

The bitcoin price has gone from 650,000 VEF per bitcoin two weeks ago, to yesterday’s 850,000 VEF/BTC high. This accounts for a 30% increase in less than 2 weeks. Dividing the local bitcoin price with the international one gives us a rate of approximately 1377 VEF/USD, a 22% increase compared to Dolar Today’s rate. The volume has also been consistently making new highs on LocalBitcoins alone, with over 243 bitcoins transacted in the past week.

Economists and consulting firms are predicting an increase in devaluation, inflation, and good’s shortages. If the black market rate continues to increase, the bitcoin price will follow. Only a change in macroeconomic policies will scare away the hyperinflation and bond default ghosts.

The IMF warned that inflation could jump to 2,200% in 2017:

If current policies continue, [Venezuela] faces severe risks, including an even larger collapse in economic activity accompanied by hyperinflation. . .

Countries such as Colombia, Brazil, Curaçao, Trinidad, and Tobago are worried that the economic disaster will spark a wave of migration into their borders.

Curaçao governor, Mrs. Lucille George-Wout, made strong declarations on this topic:

All the community can feel the effects of the problems in our neighboring country. Our monitoring team in that matter has confirmed that almost all the persons  arriving are exclusively from the areas in which delinquency, illegal jobs, and prostitution are rife.

The cover image shows a stack of Venezuelan bills worth less than $10 combined.

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Like the Dot-com and housing bubbles, Central Bankers’ bubble is to break very soon.

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Growing digital currency, Dash, has joined Bitcoin, due to soaring demand, as a part of a payment network that will benefit thousands of people suffering from Venezuela’s failing national economy.

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National debt and central banking slowly drain people of wealth. What if, instead of national debt, we were able to use cryptocurrency to give people equity? ]]>

As Japan readings a massive inflationary stimulus spending program, Bitcoin’s attractiveness as a hedge against the yen grows. ]]>

It goes without saying the economic situation in Venezuela is anything but reassuring right now. The country has been plagued by food shortages and economic mismanagement, causing significant inflation. Experts predict inflation rates will soar to 1,600% in 2017, which is insane. But at the same time, this could be a turning point for Bitcoin.

More Inflation For Venezuela In The Next 12 Months

Living in Venezuela these days is not something to look forward to. Inflation is a very dangerous situation for any economy in the world. Thankfully, the majority of countries around the world are only facing minimal inflation, albeit it is a pain in the rest to get rid of that situation as well.

Venezuela, on the other hand, is going through its worst inflation period in history. New research by the International Monetary Fund is not helping much either, as they predict a 1,640% inflation throughout 2017. For those who thought this year’s 480% was worrying, more trouble is ahead by the look of things.

This situation is affecting all aspects of daily life in the country. Food shortages, making it difficult to obtain medical supplies, and rampant theft is all daily routine in Venezuela right now. Things have gotten so dire the military is forced to guard grocery stores right now. If this trend continues, the IMF will have to bail out the country in the next few months.

Until a solution is found, the military is gaining even more power in Venezuela right now. Control of food stocks has been turned over to the armed forces. To make matters worse, it is doubtful the IMF will help the country, as the Venezuelan government cut ties with the IMF several years ago.

All of this turmoil is creating an invaluable opportunity for Bitcoin adoption throughout Venezuela. Before the Bolivar declines even further, any savings should be put into an investment vehicle that will ward against fiat currency inflation. Bitcoin presents an exciting opportunity in this regard, and it can be converted to Bolivar if needed. That being said, this situation is no guarantee for massive Bitcoin adoption in Venezuela all of a sudden.

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