What Venezuela’s Crashing Bolivar Can Teach Us About the Value of Altcoins
If you purchased $1MM USD of Venezuela’s Bolívar in 2013, it would be worth $3.40 today
Venezuela’s Bolívar has been devalued by 95%
Buy the dip you say? HODL?
Now is the time to buy low. You invest in the team. You invest in the partners. This is a live currency. It even has a central bank issuing notes! It is already working! It is crazy that people can not see this for themselves…My bag is filling up nicely with Venezuelan Bolívars and growing, and I am looking forward for a bright future for this currency. — Satirical Reddit User
If we were talking about an Altcoin, none of these comments would sound strange or out of place. However, when juxtaposed against a real world fiat currency they just come off as ludicrous.
We are no longer talking about a virtual currency — this is a real world problem that is directly impacting the Venezuela citizens in a real way.
How Bad are Things in Venezuela?
In Caracas last week, a cup of coffee cost 2,500,000 bolívars.
To buy some meat and vegetables at a supermarket would have literally needed a wheelbarrow full of cash.
In order to buy 5lbs of chicken (~ worth $2USD), would require 14.6 million worth of bolívars.
Runaway hyperinflation has made the currency practically worthless.
In July of this year, inflation reached 82,000% resulting in the government devaluing the currency by 95%.
How did the government seek to solve this problem?
Simply remove 5 zero’s from the old “strong bolívars” to be replaced by the new “sovereign bolívar”.
So, today instead of a cup of coffee costing 2.5 million strong bolívars, it now only costs 25 sovereign bolívars.
This little magic trick does nothing to solve the fundamental problem.
However, according to President Nicolás Maduro, he believes this little accounting trick will halt hyperinflation.
Yet, the IMF continues to warn that the Venezuelan inflation rate would exceed 1,000,000 percent this year.
Still…It won’t help
This is pretty much exactly what happened in Zimbabwe. These politicians work from the same playbook and their tactics are common and predictable.
In the case of Zimbabwe, the runaway hyperinflation resulted in the comical one hundred trillion bank note to be printed. That is 14 zeros added to the end of the note.
Today these bank notes have no value other than novelty items sold to tourists.
The Real Problem
The real problem is centralized government, corruption, lack of transparency and the ability to print an unlimited amount of paper currency.
This is a fundamental problem that exists in every country in the world that issues their own sovereign fiat currency (all countries).
It’s only been since the invention of cryptocurrency that these core fundamental issues have been addressed and corrected with transparency, a fixed monetary supply and decentralization.
Taken from this perspective, it can be easy to see why the banking establishment and governments pushed back hard on cryptocurrency in 2017.
Seeing the Forest from the Trees
It seems these days that everyone is complaining about the cryptocurrency market as it’s not growing like it did last year.
Just because altcoins aren’t hitting the stratosphere doesn’t mean all doom and gloom.
Developers are still developing. Existing products and services are being improved. New technologies are emerging and cryptocurrency that was once only for the technical are being designed and developed to be more user friendly — further enabling worldwide adoption.
Most importantly, cryptocurrency addresses the biggest issues found within our current fiat monetary system — decentralization, transparency and fixed monetary supply.
Taking a step back from the short-term view, it’s looking very clear that the long term view is very promising for cryptocurrency.
Throughout history there are countless examples of hyperinflation and what is happening to Venezuela is not new. There are many factors which has lead to the hyperinflation which has taken place in Venezuela, in particular the reliance of the currency on the price of oil. However, fundamentally the fiat monetary system is broken and can be easily manipulated.
What is different this time around is we now have an alternative that solves these core fundamental problems — Cryptocurrencies.
¡Viva La Crypto, Richard Black
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The purpose of ALTCOIN MAGAZINE is to post and repost stories, announcements, and tech explanations from projects within the topics of cryptocurrency and blockchain. This article was composed and written by @Richard Black for Altcoin Magazine.
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