How Venezuela Came to Be One of the Biggest Markets for Crypto in the World

Ever since 2014 and the onset of hyperinflation, they've seen marked increases in ownership and trading, with impressive rises being witnessed in the past few months, as Venezuelan inflation topped an eye-watering 46,000 percent and as the IMF predicted an inflation rate of 1,000,000 percent by the end of 2018.However, as the following will show, the meteoric rise of crypto in Venezuela doesn't simply result from the desire to avoid the worst effects of hyperinflation.

Bitcoin growthAs an indication of the extent to which crypto usage has grown in Venezuela, it's worth looking at the trading charts provided by the Coin Dance website for the LocalBitcoins exchange, which enables peer-to-peer trades between any two parties anywhere in the world.

In November 2013, around the time Venezuela had an official - i.e., massaged - inflation rate of 'just' 43 percent, a grand total of two Bitcoin were traded for VEF on the LocalBitcoins exchange.

Given that Bitcoin itself became more expensive in 2017 - rising to $19,000 in December - this expansion offers a stark indication of just how sought-after Bitcoin and crypto had become, as inflation surged to yet another peak of 1,369 percent, according to figures released by the opposition-led Venezuelan parliament.

Already, before figures for the final week of August are even available, the total number of Bitcoin traded on LocalBitcoins has reached 2,532, in contrast to the 1,558 traded for all of August in 2017.This could presage an accelerated rise as Venezuela sees out the rest of the year.

It's difficult to find websites that offer specific volume data on the DASH/VEF market, so there's no objective and publicly available reading of just how quickly Dash usage has expanded since the end of 2016, or of how it compares to Bitcoin volume.

Petro and the governmentAnd funnily enough, cryptocurrencies in Venezuela haven't been boosted solely by crypto groups, but also by the Venezuelan government itself - despite the hard line it had initially taken on Bitcoin miners.

To begin with, its creation resulted in the Venezuelan government declaring in January that crypto mining was "Perfectly legal," despite having prosecuted miners for over a year prior to that.

That said, there's no indication that cryptocurrency is being used to fund actual opposition groups, while Villar went on to tell Business Insider in December 2017 that cryptocurrency in Venezuela "Is not a matter of politics. This is a matter of survival." However, when Bitcoin is being accepted by Venezuelan businesses, and when business has often been 'the opposition' in Venezuela in recent years, there's undoubtedly an underlying political edge to their use of crypto.

Although it's likely that much of the Venezuelan trade in cryptocurrencies up until now has come from the country's middle classes - i.e., the 60 percent of the population with internet access, as well as those who know how to mine and program - the near future may see a wider distribution of people involving themselves in crypto.