Latin American Bitcoin Trading Follows the Heartbeat of Venezuela

Electrical outages reveal the nature and scale of Bitcoin usage across Latin America

Bitcoin, the vehicle currency

Using Bitcoin to transfer value into Venezuela

On mobile devices, this slideshow is best viewed horizontally. https://www.slideshare.net/MattAhlborg/transfer-value-into-venezuela-230470600

Using Bitcoin to transfer value out of Venezuela

On mobile devices, this slideshow is best viewed horizontally. https://www.slideshare.net/MattAhlborg/transfer-value-out-of-venezuela

Who is selling Venezuelan bolivars to obtain bitcoin?

Who is selling bitcoin to obtain bolivars?

Source: https://www.cfr.org/in-brief/venezuelan-exodus
  • Anyi, a documented Venezuelan migrant residing in Chile, uses her Chilean bank account and the CryptoMKT Bitcoin exchange in Chile to buy Bitcoins, which she then loads into her LocalBitcoins wallet to sell for bolivars deposited into her family’s bank account. She states that this is the most efficient way for her to send money home, with traditional, hawala-style transfers taking second place.
  • Eduardo, a documented Venezuelan migrant residing in Argentina, earns Bitcoin for his salary as a customer support manager and sells it on LocalBitcoins for deposits sent to his own Venezuelan bank account. His mother in Venezuela then uses his bank card to make purchases there locally.
  • Tomás, a Venezuelan migrant and economist residing in Argentina, has a Facebook group and popular YouTube videos where he teaches Venezuelan migrants across Latin America how to send money home through the exact two-transaction process we describe in the first slideshow.
  • Valiu, a remittance startup based in Colombia, helps thousands of documented and undocumented Venezuelans in Colombia convert their Colombian pesos into Venezuelan bolivars, using LocalBitcoins and other services in the backend to achieve this.

Other Learnings from Market Participants

  • The four informal money transmitters we spoke with averaged thousands of recorded trades each on LocalBitcoins and, according to all of them, LocalBitcoins accounted for a minority proportion of their total Bitcoin trading volume — the majority was done through private messaging groups like WhatsApp, Telegram, and Facebook groups.
  • They also told us that Bitcoin is but one tool in their chest of money transmission methods and that access to foreign bank accounts alone is oftentimes perfectly sufficient to facilitate the value transfers that their customers require.
  • During the value transfer process, traders told us that they generally jump into and out of Bitcoin as necessary and only hold it for as long as they need to in an attempt to avoid the price volatility. Before going to bed, most traders convert their Bitcoin holdings into dollars or stablecoins.
  • While Bitcoin’s use as a vehicle currency seems to account for the majority of activity we observed, some we spoke to did state that they also used it as a hedge or as a store of value as well. There are few people in the world who have experienced Bitcoin’s utility as much as these informal money transmitters, and many of them describe themselves as long term Bitcoin believers and hold an allotment of coins permanently.

Bitcoin and Venezuela’s dollarization

Source: https://yadio.io/charts.html
Source: https://www.usefultulips.org/Latin%20America_Page.html

Parting Thoughts

Appendix

  • The value transfer process often has more intermediaries where an end user tasks a professional informal money transmitter to conduct the trades.
  • Sometimes only one of the two transactions in a given value transfer process even involves LocalBitcoins and instead harnesses other Bitcoin exchanges or takes place over Whatsapp, Telegram, or Wechat trading groups.
  • One or both of the transactions may also occur as internal wallet transfers on LocalBitcoins between users and would not be registered as offical trades through their API.
  • LocalBitcoins’ increased identity requirements,
  • Migration to dollar trading instead of bolivar trading,
  • Traders transitioning away from LocalBitcoins in favor of private messaging groups.
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