Hyperbitcoinization: How Currency Crises Are Driving Nations to Crypto

Inflation is driving these nations to crypto, but there won’t be hyperbitcoinization as long as reserve currencies remain strong.
Venezuela, Turkey, and Zimbabwe: these countries are all facing ongoing economic crises. They’re suffering from high levels of inflation, and as a result the people living within them are increasingly turning to crypto as a store of value and a means of exchange. Their recent troubles have heightened the distant possibility that, at some point in the future, hyperbitcoiniztion will take place, with Bitcoin (or some other coin) replacing the bolívar, the lira, the rial and other struggling national currencies, and perhaps even becoming the world’s dominant form of money, as predicted by the likes of Steve Wozniak and Jack Dorsey.However, as encouraging as such developments are for Bitcoin’s reputation as a store of value, it’s unlikely that the moves of Turkish, Venezuelan and Zimbabwean citizens toward it and other cryptocurrencies are an immediate precursor to the kinds of blanket adoption processes outlined in the noted 2014 “Hyperbitcoinization” article by Daniel Krawisz.  Even though they’re conspicuously increasing, the volumes traded in the affected countries above are not significant enough relative to global volumes, while the isolated nature of most of these nations means that adoption has little chance of spreading outward.Added to this, for as long as such global reserve currencies as the U.S. dollar, the euro and the Japanese yen remain stable, crypto adoption won’t be boosted by high inflation in nations where the population has access to such currencies — and not to mention gold.VenezuelaThe textbook case of crisis-driven crypto adoption is Venezuela, with the first report on Venezuelans turning to Bitcoin arriving in October 2014. According to Reuters, Venezuelans were being driven to the by the capital controls imposed by President Hugo Chavez in 2003, which made it excruciatingly hard for them to obtain U.S. dollars. Given that, even then, hyperinflation was in motion in Venezuela (at 68.5 percent), locals began purchasing — and mining — Bitcoin, which stood at $388.30 by the beginning of that October, despite having fallen by around 49 percent since the beginning of the year.While data on the actual number of people using Bitcoin at this point isn’t available, the Reuters article states that Venezuela “already [had] at least several hundred Bitcoin enthusiasts.” Somewhat less vaguely, Coin Dance records that 625,573 Venezuelan bolívar (VEF) was traded for Bitcoin on the peer-to-peer (p2p) crypto-exchange in the week of Dec. 12, 2014, equivalent to about $99,403.55 at the conversion rate of the time. Similarly, CryptoCompare lists a high for 2014 (on Dec. 24) at VEF 553,633.30, which, at around $87,972.33, underlines how the volumes being traded weren’t massive — particularly for a nation with a gross domestic product (GDP) of $482 billion — even if they were growing as a result of economic pressures.Since 2014, things have picked up gradually. In the week ending on Dec. 17, 2016, there were Bitcoin trades worth a total of VEF 527,945,763, which, due to inflation of around 275 percent in

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