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Venezuela ranks third in cryptocurrency usage worldwide

Venezuelans use cryptocurrency to preserve their wealth amidst hyperinflation.

Image by skeeze from Pixabay

Tue, 01 Sep 2020, 14:28 pm UTC

The decade-long economic crisis in Venezuela has resulted in the country having the highest inflation rate in the world. The situation has forced its citizen to become more creative in finding ways to preserve the purchasing power of their wealth such as using cryptocurrency.

Blockchain data analytics firm Chainalysis recently conducted a study that ranked each country based on cryptocurrency adoption. Based on the firm’s Global Crypto Adoption Index, Venezuela has the third-highest cryptocurrency usage in the world, according to Bitcoin.com.

Chainalysis’s study on the Bitcoin usage in Venezuela, which was published on Thursday, is part of the upcoming 2020 Geography of Cryptocurrency Report. The blockchain analytics firm noted that crypto usage spiked in the country as hyperinflation drove its fiat currency almost worthless.

“Venezuela is suffering through one of the worst economic crises in modern history, with its national currency, the bolivar, becoming practically worthless,” Chainalysis wrote. “Under these circumstances, cryptocurrency has taken on an important role in Venezuela’s economy … As the Venezuelan bolivar has lost value in the midst of hyperinflation, Venezuela has become one of the most active cryptocurrency trading countries on earth.”

The study noted that Venezuelans use cryptocurrency to receive incoming remittances and to preserve their savings against hyperinflation. As of April 2019, Venezuela’s inflation was at 282,972 percent, the highest inflation rate in the world, according to the World Economic Forum.

Chainalysis revealed that Venezuela’s crypto activity is done mostly via peer-to-peer (P2P) platforms such as Localbitcoins. “Venezuela is the third-most active country on the platform, or second-most active when we scale by the number of internet users and purchasing power parity per capita,” the firm said. “Venezuela ranks 3rd for P2P trading volume in USD, after the U.S. and Russia.” Venezuelans are also using Bitcoin.com’s P2P marketplace to buy and sell bitcoin cash.”

Chainalysis said that citizens living in countries experiencing high inflation rates tend to turn to cryptocurrency to preserve their wealth. “That fits with our interviews of cryptocurrency experts on the ground in Latin America — users not just in Venezuela, but in other countries facing harsh economic conditions, turn to cryptocurrency to preserve their savings in the face of monetary devaluation,” the firm wrote.

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