Due to the previous plunge in international crude oil prices, Venezuela’s economy, which is dependent on crude oil, has fallen into a quagmire. Faced with a devaluation and devaluation of currency and inflation that cannot be described as “crazy,” cryptocurrency seems to have become the “savior” of the economic crisis in Venezuela.
Inflation in Venezuela
It is undeniable that before the drop in international oil prices, Venezuela did have a glorious era of “rich oil”. Unfortunately, Venezuela, which did not owe foreign debt ten years ago, is now the country with the highest debt rate in the world. The fall in national oil prices has brought a series of problems. The most direct and most profound impact is economic inflation. From January to September last year, the Venezuela-controlled National Assembly released data showing that Venezuela’s inflation was as high as 56%. The International Monetary Fund even predicts that Venezuela’s inflation this year will exceed 2300%.
On June 21st, the BBC reported that Venezuela’s President Nicolas Maduro once again raised the minimum wage and increased it from 1 million Bolívar to 3 million.
This is Maduro's fourth salary increase this year. If you think that the minimum wage of 3 million bolivar can allow Venezuela people to return to the rich life of the "fabulous", it is wrong. Converting 3 million Bolivarian renminbi to RMB according to exchange rate is only about 200 yuan. The change in the minimum wage does not change the lives of the people of Venezuela. What's more, under inflation, this 3 million Venezuela currency is only a drop in the bucket. Seeing that we know that Venezuela’s economy has now fallen into chaos.
The Maduro government attributed the current situation of “people’s incompetence” to the collusion between the opposition party and the vested interests stratum of the U.S. government in order to overthrow the intangible economic war waged by the government and continuously denounced this behavior as a heavy burden on the people’s lives. The burden.
Use crypto currency to save the economy
On February 20, 2018, Venezuela officially pre-sold the "petroleum" issued by the country, which attracted 735 million U.S. dollars on the first day of pre-sale. The coin has also become the legal digital currency issued by the first country in human history.
The intention of Maduro to issue oil coins is not difficult to understand. He hopes to share a piece of the current feast of digital currency, and also wants to save the crisis of economic collapse and open up a road to circumvent international sanctions.
Considering the current economic situation, citizens naturally seek people to find an alternative means of value storage, and cryptocurrency is one of them. Although the Venezuelan government has introduced “coin coins” closely related to the value of crude oil, the enthusiasm of local miners for oil coins does not seem to be high, and many people still hope to tap bitcoin.
Venezuela experienced the first cryptocurrency boom in early 2017, when Bitcoin traded in a week reached a record 805. Bitcoin has cooled somewhat since then, but LocalBitcoins data shows that Bitcoin’s investment in Venezuela has again surged in the early to mid-2018s. From March to April, the volume of Bitcoin exchanges in Bolivarian Venezuela increased by 138%, an increase of 39% from April to May.
Recently, Venezuela's French currency Bolivar has been inflicted in inflation. Many people think that bitcoin trading volume will increase substantially, but this is not the case. Randy Brito, founder of BitcoinVenezuela.com, said this may be due to the government’s recent stricter trading and mining regulations for digital currencies.
"Logically speaking, we would think that with the mad inflation in Venezuela's Bolivar, bitcoin trading volume should increase, but it is not. This may be due to the fact that the actual increase in the number of users is not much, or the total value of their transactions It did not increase too much. It may also be due to the strict trade and mining regulations recently imposed by the government."
The way forward
On March 22nd, Maduro ordered a monetary revaluation of the country’s currency unit, removing the currency denominations directly to three zeros, in the hope of saving serious currency devaluation. This also means that Venezuela’s currency has collapsed.
Since Maduro took office in April 2013, the price of Bolivar against the U.S. dollar has fallen by 99.99% in the black market. That is, Bolivar, which was bought at the time of 100 U.S. dollars, is now worth only 1 cent. However, Maduro claims that the launch of new measures does not affect the value of Bolivar. He pointed out that this has a positive effect on the protection of Venezuela from currency speculation and against the economic war led by the United States.
On June 2, the Venezuelan government announced that it will delay the issuance of the new currency sovereign Bolivarian from the originally planned June 4th to August 4th in order to give the banking system sufficient time to make the necessary technical adjustments.
Although the Venezuelan government is doing its best to save the economy, the impact of these measures remains to be seen. It is hoped that the "petroleum bills" that are directly linked to each barrel of crude oil will not become madman's tactics.