Venezuela was officially categorised as hyperinflationary in November 2016 due to its political and economic mismanagement, the time when the inflation in Venezuela exceeded 50% per month for the first time. This mismanagement has led the country to repudiate over US$ 50 billion of government bonds.
Despite all that, the country in these recent years has experienced unexpected hyperinflation levels that haven’t been witnessed in decades. The current inflation levels are impacting the lives of the locals directly. Experts estimate the current inflation levels to be 200,000% and this is expected to increase to 1,000,000% by the end of 2018, according to the International Monetary Fund (IMF).
This event is similar to the ones that took place in Germany during the 1920s and Zimbabwe in the 2000s. FIAT currency has become nearly worthless in Venezuela, and according to report by medium, people are hardly using it. The local currency of Venezuela is the Venezuelan Bolívar. At the time of writing, a single Venezuelan Bolívar is equal to US$ 0.016 or 0.0000026 Bitcoin.
The Head Analyst at Diar, Larry Cermak, specified that there is a straight up link between the LocalBitcoins’ weekly trade volume and the Venezuelan hyperinflation trend. Ever since the hyperinflation in November 2016, the weekly trade volume on LocalBitcoins rose from US$ 230,000 to US$ 3,100,000, which is an increase of 1,250%.
Venezuela’s capital, Caracas, tried their hands into starting a new currency which has seen an inflation rate of 100% in just three weeks. The 63rd President of Venezuela, Nicolás Maduro Moros, launched their cryptocurrency, petro or petromoneda, in February 2018. The currency since then has become controversial, and it hasn’t functioned as a currency, as of August 2018. As of now, Petro can only be purchased from the country’s government with Russian rubles, Bitcoin, NEM and Ethereum.
According to Weiss Cryptocurrency Ratings, the white paper didn’t mention any method about how they are basing the price of petro to oil or petrol. Weiss Cryptocurrency eventually concluded it by saying that petro: “is a worthless token“. The white paper did, however, state that the base price of a single petro is equal to the cost of one Venezuelan oil barrel.
The US perception on trading with Venezuela isn’t that great either. The 45th and current President of the United States, Donald John Trump, has prohibited any American citizen or people living within the US from investing in petro on 19 March 2018. According to Wikipedia, he did this “claiming it was designed to obfuscate US sanctions and international access financing“.
Mining cryptocurrencies haven’t been a walk in the park either. 2017 began with the Venezuelan government authorities suppressing any large scale cryptocurrency mining operations.
According to Bitcoin Magazine, authoroites arrested the miners for “the legitimacy of capital, illicit enrichment, computer crimes, financing of terrorism, exchange fraud and damage to the national electricity system“.
It’s become quite clear that not much progress has happened into Venezuela’s transition to a non-sovereign backed currency; it is still in their early phases. Iran, Zimbabwe, Argentina, Turkey are some of the other countries that faced surging inflation, and it’s quite possible to see a similar trend in these hyperinflated countries in the future.