A research by Matt Alhborg, a data-scientist and researcher at dlab.vc during a black-out in Venezuela reveals how Venezuela dominates the crypto scene is South America. It also suggests that Bitcoin is primarily used as a ‘bridge currency’ between US Dollar and the local currencies.
The electricity black-out occurred on 7th March with which economic activity across the country came to a halt for several days. In the midst of this incident, Alhborg observes a drastic drop in the Bitcoin and crypto trading volume in Venezuela which is quite obvious.
LocalBitcoins Volume Indicator
However, it is also seen that along with Venezuela, the drop was startlingly equivalent in other Latin American countries as well. It reciprocates with Argentinian, Chilean, and Mexican peso along with the Peruvian sol. It shows the dominance of Venezuela in the continent when it comes to cryptocurrency trading.
Hence, he notes that Bitcoin is acting as a vehicle currency across South America.
Dollarizing Latin America
Most Latin currencies, especially Argentinian Peso and the Venezuelan Bolivar, suffer from hyperinflation. Hence, $10 worth income today could become equivalent to $5 in a month’s, over even a weeks time. Hence, holding savings in Bolivar is impractical.
While one might think that Bitcoin is the choice for Store of Value (SoV), it is actually the US dollar, Chinese Yuan and other stable FIAT currencies in high demand.
Venezuela isn’t ‘Bitcoinizing’. It’s ok to admit that. Bitcoin is mostly a wholesale network used by sophisticated brokers to facilitate the flow of foreign currency into the country,