In 2017, we’ve seen Bitcoin’s market capitalization to reach $300 billion briefly while its price almost hit $20,000. Its popularity was at its peak considering that it is operates using blockchain technology that allows users to transact without a third party that confirms the transaction. Apart from this, Bitcoin has been viewed as the modern day gold. Gemini President Cameron Winklevoss even says that Bitcoin is gold 2.0 and he is quite bullish regarding Bitcoin.
The thing with Bitcoin is that it is neutral. Developed in 2009 as an answer to the global financial crisis in 2008 by a group or an individual that goes under the name Satoshi Nakamoto, Bitcoin is finite but also volatile just like gold.
Used by Dysfunctional States
Just like gold, Bitcoin has been used by dysfunctional economies such as that of Venezuela. As inflation rate spikes up in Venezuela, Venezuelan’s interest in buying the cryptocurrency has significantly jumped in the last few months.
Between March to April 2018, the volume of Venezuelan Bolivar used to buy Bitcoin increased by 138% according to LocalBitcoins data. In fact, the government has tried to stop Bitcoin mining by banning crypto mining rigs from entering the country.
Bitcoin Against Economic Instability
Though Venezuela made its move to stop the use of Bitcoin in the country, the Maduro regime has turned to blockchain technology in order to be able to circumvent the existing trade sanctions made against Venezuela by both the US and European countries. And recently, profits from its Petro have been used to even
build houses for the homeless.
According to Juan Villaverde who works as an analyst for Weiss Cryptocurrency Ratings, he said that “In the past, when corrupt governments devalued their local currency or seized assets from citizens, investors ran to the US dollar or gold…Today, many are moving into cryptocurrencies, where their money sits on a global distributed ledger that no central bank or government can touch”.
Iran is also feeling the effects of US sanctions right after the US moved away from the 2015 nuclear agreement. On Tuesday, US ambassador Richard Grenell expressed his concerns regarding Iran’s plan to withdraw 300 million euros from German banks. Grenell said that “We encourage the highest levels of the German government to intervene and stop the plan”. Though Trump administration is ramping up its pressure against Iran, Iranians have found a refuge in digital currencies.
According to the chairman of the economic committee of Iran’s parliament, Iranians spent more than $2.5 billion in order to purchase cryptocurrencies.
In an article from Forbes.com, a person from Iran who chose to remain anonymous said that he is trying to move money via Bitcoin to his son who is based in North America. According to his son: “With exchange offices closed, sanctions and the rial dropping like crazy it seems like a good idea to use Bitcoin. I know that there’s a few people selling and buying Bitcoin in Iran with LocalBitcoins”.
Mohammad Reza Purebrahimi who is the country’s chairman of Iran’s economic commission mentioned that “Despite the fact that a minority of the people of our country are customers of virtual currencies and their new markets, more than $2.5 billion has fled the country following their purchase while a majority of people active in this area are in it for speculative activities and macro profits”.