It’s currency crisis season again.
Venezuela has been involved in a major economic crisis in recent times with some describing it as the biggest economic crisis in all of history. In yet another interesting turn of events, trading between Bitcoin and the Venezuelan Bolivar has surpassed all records, exceeding 500 million for the first time in its history. As the country battles through hyperinflation and looks to cryptocurrencies like Petro as a remedial measure, this latest statistic further magnifies the change in Venezuela’s economic landscape.
According to reports from Coindance, the BTC/VES pair achieved unprecedented volumes never seen before. This almost coincides with the Venezuelan Government’s revaluation of the nation’s old currency and the introduction of the new “Sovereign Bolivar.” Its currency got hammered in a 96% deduction for the Bolivar’s value.
Surge in volume
What happened? Cryptocurrency exchange LocalBitcoins recorded a trading volume of 506.3 million VES, shattering the previous record of 175.8 million VES in the process. Many have pointed the finger at the Venezuelan government’s recent economic policies — including the introduction of the new Sovereign Bolivar — which is tied to the country’s infamous Petro cryptocurrency. Both projects have received outright criticism from the international community, with some labeling it as an outright scam — because it probably is one.
However, the country’s leaders are adamant that these new economic policies are the solution to the rampant hyperinflation and increase the purchasing power of normal Venezuelans.
And you can’t move, either
Eduardo Gomez, a Venezuelan national and head of support at Purse.io, observed that Venezuelan citizens abroad would be required by law to notify their banks about their migration. According to official documents, this is required by the government, along with the IP addresses of those who wish to access their banking setup from abroad.
Petro’s recent woes
Despite the assurances given by president Maduro regarding Petro, investor sentiment is at an all-time high as investors speculate about the viability of the project. President Maduro announced that Petro has already amassed a $3.3 billion valuation and is actively being used to pay for imports.
But a Reuters report challenged President Maduro’s claims and revealed that Petro had no investors or active users behind it. The declaration was made following a four month investigation by the agency, which could not find any trace of recoverable monetary resources that back up the cryptocurrency.
Since the price of Petro is pegged to the price of one barrel of crude oil, the country hopes that Petro will be the answer to its ongoing (self made) crisis. But because of the huge infrastructure change that is needed to deliver such promises, the full value of Petro can never be realized. Former oil minister that served for ten years under President Hugo Chavez and now lives in exile, Rafael Ramirez, recently estimated it would cost at least $20 billion to access the promised reserves. “The Petro is being set at an arbitrary value, which only exists in the government’s imagination,” Ramirez stated.
The recent economic policies undertaken by the Venezuelan Government has certainly stirred up a lot of debate in the global cryptocurrency community. Thus, many believe that the recent surge in BTC/VES trading is a proof that cryptocurrencies can be used to create resource backed assets. But a majority of the global community is comparing Petro to a fraudulent scheme, calling it an elaborate scam by a corrupt South American government. The above new report only fuels the debate further, while exposing the plight of the Venezuelan economy and how it’s affecting citizens. Only time will tell if Venezuela can actually recover from the self-immolation — otherwise appearing as hyper-inflation that has plagued the country for the last two years. Good luck.