The case of Venezuela’s crypto phenomenon

The world is verging upon a discouragingly fast financial transformation towards the sunnier –  a more sustainable, blockchain based decentralized economy model. However, the transformation cycle is way far from it’s completion when the endorsement methods and use cases are inclined to move towards the rudimentary. The majority of projects circulating in the crypto industry are usually vocal about equipping us with the alternatives to traditional financial solutions without authentic and valid use cases or user base. 

On the contrary, they often lack the evident advocacy to estimate their real value, unfortunately, they are not secured by any real assets or earnings that would unfold their overinflated market cap. Modern world traders are exposed to persuasion and silver-tongued brainwash to believe they are to multiply their earnings and always get more in some way. The psychological aspect of such a practice is quite concerning and is leading us to believe that everything surrounding decentralization is hype based rather than a calling for faultless technology adoption . 

At the same time, according to The 2020 Geography of Cryptocurrency report brought by Chainalysis some of the developing countries are giving us the clear clues about rational adoption, demonstrating that, in fact, fiat money sometimes can be more volatile than cryptocurrency given the particular inflation context, considering that some of the Venezuelans are predisposed to rather cling to crypto in order to aggregate their savings. 

A notable demand in an enterprising metamorphosis leading to the new decentralized economy made us reassess the idea of a developing financial ecosystem enforced by smart contracts, escrow accounts and oracles, which serves as a gateway to digitally replicate real assets and generate capital on the blockchain and we would like to ruminate on the current financial demands focusing on countries suffering from the ongoing economic depression.

Hyperinflation reaching 6500% only last year has made Venezuelans reconsider their approach to savings and rotation of the US dollar since 66% of all the financial transactions performed during 2020 were executed in the American currency.

Surprisingly or not, New Yorkers from Chainanalysis have also estimated Venezuelan crypto adopters to be one of the most active worldwide in terms of peer-to-peer dollar-based cryptotrading, setting a high bar along with Russian and US crypto users. Serving as a lifesaver financial outlet and a link between Venezuelans and millions of citizens that were forced to leave the country because of the current political climate, cryptocurrency is powering through the unknown and becoming a phenomenon despite controversial adoption only throughout the upper middle class and “creme de la creme” society slice.

Journalists claim that absolutely anything, from groceries to furniture and electronics, is open for virtual purchase. The preferable coins the Venezuelans mainly go for are Bitcoin, Ether, Dash and EOS.

In the meanwhile, the government of Venezuela has managed to issue a BV wallet as their Central Bank Digital Currency where any citizen can convert any currencies in rotation (i.e. local bolivar or US dollar) to bitcoin. 

It’s hard to predict the local satisfaction level with the digital money at the moment, but from now on we can start tracking and deriving the analysis based on the experience of this very country with the digital assets she was naturally inclined to adopt.

Is Venezuela a reliable example of how a country with a harsh economic climate should approach cryptocurrencies as a cure-all or not – we might start getting an answer to that in the next couple of years.

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