The number of Venezuelan Bolivars that were exchanged for Bitcoin last week hit a new all-time high as the International Monetary Fund (IMF) projected that Venezuela will experience the world’s highest inflation rate in 2019.
During the week that ended on August 3, the number of Venezuelan Bolivars that were exchanged for Bitcoin rose to nearly 67 billion. The previous record was nearly 58 billion and this was recorded a little over a fortnight ago, according to Coin Dance.
Thank goodness for Bitcoin
Per the Associated Press, the IMF is projecting that Venezuela’s inflation rate will hit nearly 1,000,000 percent by the end of this year. As a deflationary currency, the demand for Bitcoin in Venezuela might be partly driven by those looking to escape the hyperinflationary conditions. And of course, cryptocurrency acceptance in commerce is growing in Venezuela.
The projected inflation rate is, however, more tolerable relative to what had been forecast four months ago. In April, the IMF had projected that Venezuela’s inflation rate would hit 10,000,000 percent but have now lowered the forecast to about a tenth of that. Per the IMF the lower inflation rate is due to the Venezuelan central bank, Banco Central de Venezuela, raising the reserve ratio for the country’s local banks.
Besides acting as a store of value, Bitcoin could also be serving as a means to transfer value across borders while avoiding government controls. This is especially so as Venezuelans continue to flee the country. The IMF estimates that Venezuela’s emigration levels could reach five million people before the close of 2019.
Are Venezuelans holding on to their Bitcoin more?
Since the third quarter of 2018 the level of Bolivar to Bitcoin trading volumes has been breaking records nearly on a weekly basis. However, the same has not been replicated with regards to Bitcoin to Bolivar trading. The all-time record for the highest of Bitcoin bought in Venezuela though LocalBitcoins was reached in February.
Since then the volumes have been steadily declining. This could partly be due to the fact that the Bitcoin price has also been going up around that time resulting in fewer Bitcoins being purchased for the same amount of Bolivars.
A growing Bolivar-to-Bitcoin volumes but falling Bitcoin-to-Bolivar volumes could also indicate that the number of those buying the cryptocurrency in Venezuela has been steadily growing while those selling has been dwindling.
Besides the high inflation rate, the IMF also disclosed that Venezuela’s economy has contracted by over 60 percent since 2013, making it one of the deepest contractions across the globe in the last fifty years.
Neighboring economies benefiting from Venezuela’s crisis
Additionally, the economic and political conditions in Venezuela have had both positive and negative impact on neighboring countries. As a result of many Venezuelans fleeing to neighboring Colombia, approximately 1.5 million immigrants, the Colombian government has had to relax ‘fiscal goals and increase public spending’. This has resulted in a slight economic bump.
A positive impact brought about by Venezuelan immigrants has also been noted in Chile, per the Buenos Aires Times.