Venezuela’s peer-to-peer (P2P) Bitcoin trading volume has rallied to record highs on Localbitcoins, the most popular P2P Bitcoin trading site in the world. This massive surge of Bitcoin trading in Venezuela likely has to do with the turbulent switch from the Bolivar Fuerte (VEF) to Sovereign Bolivar (VES).
In the past week, there has been VES 506.3 million of trading volume, shattering the old record of VES 175.8 million set the week before.
Due to hyperinflation of Venezuela’s fiat currency, at the rate of 100,000% per year and increasing towards 1,000,000% per year, Venezuela’s government was forced to redenominate the VEF by chopping off five zeros and launching the VES. This means each VES is worth 100,000 VEF. This was because buying groceries with the old fuerte had become an intensely arduous task and was rapidly getting worse; people had to take multiple bags loaded with cash to the store just to buy common food items. A cup of coffee worth less than USD 0.50 cost VEF 2.5 million.
The switch to the Sovereign Bolivar officially occurred during August 2018, and a currency switch like this causes widespread panic and fear. Venezuelans are choosing to offload their Bolivars for Bitcoin, since Bitcoin is far more stable and a much better currency. Venezuelans are forced to buy goods after work, whatever they can find, and trade them later for the goods they really want, since the Bolivar loses value so rapidly.
The trading on Localbitcoins, amounting to BTC 1,143 worth roughly USD 8 million, is probably just a small fraction of total Bitcoin volume in Venezuela. These volume numbers are just for Bitcoin traded via Localbitcoins escrow, many Localbitcoins deals occur outside of escrow, while lots of deals occur through Bitcoin dealers as well as other P2P trading platforms.
What can certainly be discerned from this data is that Venezuelans are buying Bitcoin faster than ever before, likely due to a lack of confidence in the newly released Sovereign Bolivar. Just because the Venezuelan government redenominated their currency doesn’t mean the situation is any better. The inflation rate will continue to accelerate as before and if projections come to fruition, the Sovereign Bolivar could be utterly worthless in less than a year.
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