Everybody is familiar with the term “weak currencies”, which are those that experience a devaluation in comparison to other currencies. It is easy to identify weak currency countries in economic crisis. These countries often have more currency demand than supply, and they are more likely to import than export. The strength of an economy determines the currency’s value.
Contrary to brexit, where the value of Britain’s currency, the pound sterling, fell, the currencies of Venezuela, Turkey and Iran have seen a sharp decline in their value. These currencies have experienced sharp declines and high inflammations. These countries’ citizens have turned to cryptocurrencies to rescue themselves. These internet-friendly currencies have given citizens access to more reliable exchange channels and stores than their national currencies.
Venezuela
Since 2014, Venezuela has experienced hyperinflation. Inflation in Venezuela has been high since 2014. However, in September 2014, the real inflation rate soared to 100%. Citizens looked to cryptocurrency for ways to protect their assets during this period of devaluations. In addition to supporting the economy, cryptocurrency became the channel through which citizens could access external aid. To help local NGOs and other organizations buy food and distribute it within the country, people who live abroad have donated cryptocurrency.
But, Petro, the government’s own cryptocurrency, was launched quickly. Petro, Venezuela’s cryptocurrency, is now well-known. It is backed by the country’s oil reserves and minerals. This launch saw the lifting of all previous laws that prohibited crypto mining, making it ‘perfectly legal”. The government also provided free lessons on cryptocurrency to citizens.
As Venezuela’s economic situation continues to decline, cryptocurrency is being used by more businesses as a way of saving their business. In the near future, cryptocurrency trading will be more popular than the original 60%.
Turkey
In October 2017, the Turkish lira’s inflation rate (TRY), increased to 11.9%. This was the moment when the Turkish citizens turned to crypto for help. The volume of transactions was initially small. By November 4, 2017, only 41 bitcoins had been traded in exchange for Turkish lira.
This shows that an increase in inflation in a currency opens up opportunities for cryptocurrency. The country doesn’t show any dramatic rise in inflation without hyperinflation.
The threat of hyperinflation was felt by the Turkish people over time. Inflation rose to 15.39% at the beginning of July. This led to a 131.9% rise in crypto volume in Turkey.
Erik Voorhees CEO of ShapeShift, saw the devaluation and inflation of Turkish liras and increased preference for bitcoin.
“We have entered a period now when some fiats may be less stable than Bitcoin. Turkish lira plummeting ~20% in one day.”
After a June 2018 survey, ING Bank released stats that showed more people agree with Erik. The stats show that Turkey is the country with the highest percentage of cryptocurrency owners, with almost 18% of those claiming to own some form of cryptocurrency.
Cryptocurrency is a way to ensure freedom for countries like Turkey, which are under the dominance of the dollar.
Zimbabwe
Zimbabwe has been in economic crisis since long. The country has been experiencing hyperinflation for nearly ten years, with its rate at 231,000% in July 2008. Zimbabwe abandoned its national currency, the Zimbabwean Dollar, in protest at the introduction of a trillion-dollar note.
The government was able to allow citizens to use different currencies within the country as a result of the financial crisis. This created problems such as a shortage of foreign currency in the country. The Government increased capital controls to control the situation.
Zimbabwe, like other countries with weak currencies, is also turning to the digital currency. Golix, a Zimbabwean crypto-exchange showed a significant increase in its customers. This was due to citizens who wanted a currency that wasn’t subject to government regulations. Golix’s monthly trade soared to over a million dollars due to rising inflation.
But unlike the two other countries, Zimbabwe’s government opposed the idea of crypto industry as a means to escape. This led to the country turning its back on its brighter days. Not only did the government miss an opportunity to stabilize things, but they also missed a chance for tax evasion.
This is a sign of the immense potential and growth of the cryptocurrency industry in the global economic system. Despite fluctuations and instabilities, crypto is still a great savior for the citizens of these countries. This mass adoption of cryptocurrency and its rise in weak currency countries is enough for economists to forget about their bad reputation.