Venezuela has been in the headlines for many moons because of the social, political and economic crisis that is going through. There are continuous protests, shortages, and hyperinflation. For this last reason, the demand for bitcoin (BTC) and other cryptocurrencies has boomed in this country. Venezuelans see them as a solution to inflation.

Quick history

Since 2003 Venezuela has implemented a tight currency control policy that means that any person or company that wanted to exchange their bolivar’s (Venezuela’s official currency) to a foreign currency must turn to the government for permission and the exchange rate. Otherwise, they will have to go to the black market where the rate is much higher.

Maybe you are picturing a hard way to find dollars but is not as bad as it sounds: it is as simple as checking the price of the black market dollar on a website and posting a message in your Facebook wall saying that you are buying or selling dollars. Eventually, somebody will come and agree to do the transaction.

However, inflation has skyrocketed. Hugo Chavez (previous president) in 2007 took three zeros out of the currency, and the current economic policies of the government have led the currency to devalue by 90%, eliminate five zeros and rename the currency to “Bolivar Soberano”.

It is difficult to understand how the country with the largest proven oil reserves in the world has become a failed state. There were many factors that have caused this. For example, the expropriation of important industries responsible for the production of most of the goods (most of them bankrupt). The effect was demotivating private industry and forcing the country to depend or rely on imports for most of the basic products.

There have been other big effects: the collapse in oil production (Venezuela’s main source of income), the central bank printing money irresponsibly, failed socialist policies, mismanagement of resources, corruption, the list goes on.

The rise of Bitcoin & the plummet of the Bolivar

The devaluation of the Bolivar currency is as impressive as the rise of bitcoin. In 2012 you could buy one bitcoin for $13. Nowadays, one bitcoin has a price of $6,366. On the other hand, if you had bought $1.000.000 in Bolivars on that same date, today it would not be worth more than $3.

The International Monetary Fund says that inflation in Venezuela will hit 1.000.000% this year and that it may hit 10.000.000% next year. It is currently the highest inflation in the world and in modern history.

(In this chart only the highest and lowest prices reached were used)

This rampant hyperinflation made the bolivar practically worthless, with ordinary people needing piles of cash to pay for a product that the price increases in a matter of days. As a consequence, Venezuelans want to keep their money in any other forms of assets (like gold or other FIAT currencies).

Bitcoin is seen as a good alternative to inflation even though it is highly volatile. In addition, it is really easy to buy it with bolivars: you just need to go to the website to find a trustworthy merchant, agree to do the transaction and voilà! You will have your bitcoins in your digital wallet. 

The weekly bitcoin trading volume is skyrocketing. Setting new records every week, it is becoming the highest in Latin America reaching around 1000 BTC traded.

This is becoming a popular option among immigrants who want to send remittances to their relatives, thereby circumventing capital controls, avoiding delays and fees of an international wire transfer.

As well, many Venezuelans are using the P2P exchange platforms such as Localbitcoins,, facebook groups, etc. to sell their goods for cryptocurrencies. On the internet, you can find properties, cars, household appliances, gold, musical instruments, and items that are difficult to access.

A lot of merchants are turning crypto friendly to avoid the bolivar. Currently, There are more than 301 businesses accepting cryptocurrencies as a form of payment in the country.

Other cryptocurrencies

Bitcoin could be like the digital gold but in terms of the currency of change isn’t useful due to the high transaction fees and slow confirmations. That’s why Venezuelans are experiencing with other cryptocurrencies.

Dash has been evangelizing his coin in South America for some time, being instant and cheap to transact gives a good solution. They have a big community in Venezuela and impressively is the country where more merchants in the world accept it, around 116 locals. They are constantly motivating companies & people to use it as a daily medium of exchange. They do lectures, impart courses to teach people about cryptocurrencies and do giveaways to recruit people.

Bitcoin cash has more than 60 businesses across the nation that accept it as a form of payment. They are growing in adoption and real use.

Zcash & Ethereum has surged in popularity. A lot of people choose them because they can be mined with a GPU and attract less attention from the authorities. There are some interesting and funny blockchain projects made by Venezuelan entities. Onix, Bolivarcoin, Cocuycoin, and Arepacoin, are some of them.

The first government to launch their own Crypto

 At the beginning of the year, the president of Venezuela surprised the whole crypto community by saying that Venezuela will be the first country to launch their own cryptocurrency called the Petro.

It will be backed by barrels of oil from the Orinoco belt and pegged to the international price of the barrel of petrol. The government says It will be used for international commercial transactions, stop the inflation, pay the gasoline in the frontiers of the country, among others. 

Since then they have re-launched the coin 3 times, changed the algorithm and claim that they successfully had raised 3.3$ billion dollars without publishing evidence. These attempts are seeing as a way to bypass the sanctions that the government of the United States and Europe has input to Venezuela and access international financing.

Nevertheless, Donald Trump has already advised that will ban all deals made with the petro currency. Also, the opposition claims that the petro is illegal and that it resembles more a public debt instrument.

It is hard to believe that this cryptocurrency will succeed in seeing the government’s record. Corruption, violation of human rights, a country submerged in crisis and some of their leaders being accused of narcotraffic by the DEA are not good signs.

The biggest exodus in the Venezuelan History

In the next two years, it is expected that around 2 million people will leave the country by any possible exit: bus, foot, boat, plane. This is one of the biggest migration crisis in Venezuela & Latin American history. It could be comparable to the migration crisis of Europe in 2015.

They aren’t running away from a war nor a natural disaster. They are forced to flee from an economic collapse caused by the government that has left medicine and food shortages, while thieves rob and kill with impunity.

Many of these people are turning to bitcoin because of the lack of possibilities to open a dollar account abroad and the ease that it gives to carry their money safely. It is only necessary to hold your private keys secretly.

Alejandro Perez, Systems Engineer: It’s the safest way to carry my money, I change all my money to bitcoin and I’ll be crossing the frontier to Colombia where is quite dangerous and even the Venezuelan military can rob you.” 


Mining and services

In Venezuela most of the services are subsidized by the state: that’s why electricity, gasoline, internet, and water are so cheap. You can pay 0.01 cents for a full tank of gas, 1 dollar for a whole year of electricity. However cheap doesn’t mean good: the services don’t work properly and there are short outs of electricity and water in the whole country.

Caracas slums @sergzlez

Crypto mining consists of providing computer processing power to the blockchain in exchange for a reward with cryptocurrency. Venezuela is one of cheapest countries to do this activity and is helping a lot of people to survive the crisis, but is not something that every Venezuelan can afford: only medium and upper class can do mining because of the high cost of these machines.

This year despite the price fall it is still profitable. At today’s price, an antminer S9 (mining machine) can give a revenue of 100$ a month. That’s 10x the minimum wage of a Venezuelan promethium. 

antminer btc

Cryptominer @sergzlez

The awkward situation is that during 2016-2017 mining became really popular because the profits generated were really good reaching peaks of 600$/month per machine. Local police started noticing this and begin raids on crypto miners to extort them and made allegations that they were breaking the law by creating a currency.

People who do mining try to keep it in secret because of the danger that it carries. This year the government has created a register of crypto miners, encouraging the miners to subscribe it and claiming that is totally legal.

Saki Serres, Crypto miner:  I started mining ethereum at the beginning of 2016 and thanks to this I could emigrate and start a new life in Spain. There are rumors about government officials running mining farms in the south of the country with the confiscated equipments.”


The best time to adopt bitcoin

Venezuela is the perfect “Guinea-pig” for cryptocurrencies due to a restrictive currency control, hyperinflation, cheap electricity, and a government favoring policies toward cryptocurrency adoption. Although we are still in the early stages of using BTC as a daily medium of exchange, adoption is increasing. Thanks to its decentralized nature, free from a central bank control and easiness for cross-border transactions, it really gives a clear advantage over FIAT currencies.

Cryptocurrencies are changing the way we interact with money. They can be seen as speculative assets but they are considered lifesavers in places like Venezuela, where the government can disappear your wealth overnight.  

As crises like this continue to appear, bitcoin will continue to gain adoption. Nevertheless, as long as the dollar and euro remain stable would be difficult for bitcoin to replace them as a global currency.

Drop me a message if you have any feedback about this article or you’re interested in knowing more about cryptocurrencies. Also, I am open for internship or job opportunities in Digital Marketing and the Fintech industry.

PD: By the time this article is published, it is very likely that the numbers and prices will change due to the high volatility of these markets.

“Long bitcoin, short the bankers”

Sergio Gonzalez

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