Venezuela in Crisis: Bitcoin Remains a Haven

The inflation rate of the Venezuelan bolivar has increased to triple digits, leading to a financial turmoil which Venezuelans have struggled to cope with over the past two years. As a result, families and households have turned toward bitcoin, a decentralized digital currency, to mitigate the financial damage inflicted by the plummeting value of the Venezuelan bolivar.

In January 2017, Jim Epstein from Reason offered insights into the bitcoin mining ecosystem in Venezuela and the increasing level of bitcoin trading within Venezuelan black markets. Despite it being illegal in the country and the local government’s crackdown on bitcoin miners, young students and freelancers have started to mine bitcoin to secure lifelines for their families.

Alberto, a 23-year-old Venezuelan graduate with a degree in computer science, started mining bitcoin in December of 2016 due to the lack of job opportunities in the nation. The vast majority of available jobs even for fresh graduates with a degree in computer science, for example, paid a maximum rate of $20 per month, which was nowhere enough for Alberto to support his family financially.

Instead, Alberto turned toward bitcoin mining and began to earn over $1,900 on a daily basis by operating a bitcoin mining facility in Venezuela. Through his earnings, Alberto has been ordering foods and necessities through Amazon’s Prime Pantry.

Ryan Taylor, the CEO of Dash Core, the development company behind the seventh largest cryptocurrency Dash, explained in an interview that an increasing number of young and unemployed graduates and professionals have begun to study bitcoin and various ways to receive their earnings through bitcoin and other cryptocurrencies.

Taylor revealed that the demand toward Dash is also on the rise and the level of activity and engagement in their forums, Youtube videos and chat rooms amongst Venezuelan users have increased significantly.

“If you’re going to be in something volatile, you might as well be in something that’s volatile and rising than volatile and falling. We’re seeing huge demand in Venezuela through inquiries in our support line, as more and more people join our forums and chat rooms, even on how-to Youtube videos that have popped up. It’s in these locations where the incentives to go into digital currencies is the strongest. We’re seeing a lot of growth in the region,” said Taylor.

Many users in Venezuela are purchasing bitcoin through three major outlets and trading platforms; the country’s first and largest bitcoin exchange SurBitcoin, LocalBitcoins and black markets.

In June, the weekly LocalBitcoins trading volume in Venezuela doubled since April to $1.3 million, demonstrating an exponential increase in demand. For the week ending June 25, 425 bitcoin were traded on LocalBitcoins; this level has become the new normal since early 2017 as the crisis intensified. Comparing to countries with similar GDP per capita such as Brazil, Thailand, and South Africa, Venezuela’s demand for bitcoin is markedly higher. 

Jorge Farias, the CEO of Venezuelan bitcoin and Dash exchange Cryptobuyer, noted that the company had seen all-time high user growth in the past few months. Farias further emphasized that a large number of investors in Venezuela are using bitcoin to safeguard their savings and use it as a digital currency on a daily basis:

“Venezuelans use these alternatives not only to safeguard their savings, but also to be able to operate in daily business and commerce. An alternative to entrepreneurs and people who lack the means to buy and sell not only merchandise but services, and to send and receive remittances.”