Talking about LocalBitcoins necessarily refers to Venezuela. Although it is a P2P portal based in Finland and has no representation in the South American nation, its presence on the Venezuelan market is undeniable. But how does this platform affect the Venezuelan economy?
The Bitcoins peer-to-peer market in Venezuela is a badge on the entire cryptocurrency market. Even the government agencies themselves have come to keep an eye on their operations.
Venezuela has become the nation of hyperinflationary economy that a Introducing cryptocurrencies beyond speculation and investment. There are few but iconic use cases from people who have seen in Bitcoin BUY NOW an option to protect your savings.
Amid the Venezuelan socio-economic chaos, LocalBitcoins generally served as a measurement portal for the Venezuelan economy. To reach operate higher numbers than the Caracas Stock ExchangeThe P2P trading of Bitcoin, the most important and only exchange of the South American nation, shows that it has a unique weight in Venezuela.
Despite the fact that LocalBitcoins is used by a small group of Venezuelans and that Bitcoin can be a strange term for the vast majority of Venezuelans, The operations taking place there affect the entire nation.
A dollarless nation is dollarized
One of the most complex aspects to understanding Venezuela’s current economic reality is Your bolivar / dollar exchange rate. Understanding this point outside of Venezuela can be complex because the cultural and social elements typical of Venezuelans are not understood.
The other South American oil power persisted throughout much of its history as a highly dollarized nation with a “port” economy. A large amount of imports, along with a devalued dollar, according to many experts, For a long time they maintained the demanding life rhythm of the Venezuelans.
The drop in oil prices in the early 2010s, along with the scarce (or not at all) preparation that took place at the state level, They brewed the political, social, and economic crisis within the Latin American nation.
As expected, the decline in oil revenues caused the Republic’s dollar revenues to decline and reach a critical level. Currency controls have been introduced in a nation used to dollars to “avoid capital flight”. They pushed until they reached the point where the dollars were no longer available.
But what does all of this have to do with Bitcoin? Until not so long ago, the “de facto” Venezuelan dollarization that is being experienced today it was illegal. With tough and incomprehensible legal entities, the Venezuelan authorities have long considered the dollar operations illegal, which led to them Bolivar’s buying and selling of dollars was an illegal act.
Amidst all this scenario Bitcoin appeared as an option for many who were looking for a hard asset to the detriment of the bolivar, the Venezuelan national currency, which is devalued within a few hours.
How does bitcoin affect a dollarized nation?
As previously mentioned, however, US dollar operations are no longer prosecuted within Venezuela has opened up to de facto dollarization in the midst of a hyperinflationary economy. In the midst of this situation, the question “What is Bitcoin for when there are already dollars?“”
This question may seem logical, and its answer is considered rather illogical.
In order to be able to react to this, it must first be made clear that the dollar market in Venezuela goes beyond decriminalization. usually remains very opaque. The vast majority of the operations that make up the exchange rates on the market are not transparent, and this means that Many objectively ignore why the dollar’s price “rises” or “falls” against the bolivar.
In this “black market”, one of the few markets in which the bolivar is listed and enables the operating results to be presented more transparently is accurate LocalBitcoins. The pricing process allows everyone to determine the price in Bolivar that Bitcoin has and As an asset with a clearly defined dollar price, a triangulation can be performed to determine the exchange rate.
It may seem like a very complex process, but many of the informal indicators that determine the course of the Venezuelan economy are based on the portal’s statements. The dollar “Bitcoin” or “LocalBitcoins” are known in large parts of Venezuelan trade.
Cause or effect?
After understanding the use of the Finnish portal in the Venezuelan economy, it is important that we determine whether the operations are carried out here are the cause of inflation in the nation or if on the contrary, They are just a reflection of the economy.
First of all, I think It is impossible to give a 100% correct answer to the question Because not even the best economists in the country can pinpoint the cause of Venezuelan inflation. Government economic policies, low oil prices, personal sanctions against officials, corruption and the indiscriminate spending of Bolivar are some of the reasons that have been given, some with more justification than others.
However, in order to assess the position of LocalBitcoins in the middle of the situation, this is necessary evaluate the actual “impact” that the P2P portal has on the market. We can try to measure this by evaluating the business volume shown on the portal and comparing it with the monetary liquidity reported by the country.
According to the Central Bank of Venezuela in late March, monetary liquidity in Venezuela stood at 74 trillion bolivars. While you’re on LocalBitcoins in March, A total of 1.14 trillion bolivars were raised among all operations performed on the portal. Figure a shows a comparison 1.54% of the total amount of circulating bolivars.
In response to that It is difficult to determine that only 1.54% of the Bolivar in circulation in the economy are responsible for inflation in the South American nation. We might think that what was seen in LocalBitcoins (and their prices) rather reflects the difficult situation of the Venezuelan economy.
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