Venezuela’s currency has lost so much of its value that people have given up on counting the notes—they just weigh piles of cash. So far this year, the bolívar has lost nearly half its value compared to the dollar, while inflation has shot up as much as 15 times. That’s according to best estimates, since official data isn’t available.
When a national currency is tanking as badly as the bolívar, a stateless cryptocurrency that’s gaining in value suddenly sounds pretty appealing. It looks like at least some Venezuelans are turning their bolívar into bitcoins to not only escape the spiral of devaluation in the state-issued, or fiat, currency, but to reap the profits of a bitcoin price that’s been buoyant all year. Trading out of terminally weak or volatile fiat currencies for bitcoin isn’t unique to Venezuela; Argentinians have been doing it for years, as the New York Times (paywall) has reported.
Trading volumes on LocalBitcoins—essentially an online classifieds page for bitcoin buyers and sellers to find one another—have spiked in Venezuela. Trading volume has spiked recently to as high as 370 bitcoins a week, worth about $224,000 at the time.
In the grand scheme of things, the bolívar-bitcoin trade is minuscule; trillions of dollars change hands on the world’s currency markets daily. It’s also not an easy trade to execute, as a Venezuelan must know her way around bitcoin marketplaces and currency exchanges—Venezuela has one major exchange, called Surbitcoin—to cash out their bolívar.
Once a Venezuelan user has bitcoin, however, she could hang onto the cryptocurrency, which might break past its highest point for the year, or hold it in US dollars or other currencies at a wallet service or on an exchange. One service, Xapo, founded by Argentinian entrepreneur Wences Casares, says it’s seeing a number of users in Venezuela “heavily utilizing” its app.
Of course, caveats apply: Bitcoin exchanges and wallets are regularly hacked for billions. Xapo, incidentally, offers a “vault” option that involves air-gapped servers stored in secret underground locations—not the worst way to wait out the bolívar’s downward spiral.