Venezuela: When Government Failed, Bitcoin Prevailed
From Bittox
Three days after the Venezuelan National Assembly Finance Commission announced that inflation had reached an annual rate of nearly 9,000%, the one-day volume of person-to-person Bitcoin trading in Venezuela hit a record of over 1 million. This milestone is undoubtedly a sign of the times, as less than one year ago when inflation was at an annual rate of roughly 2,600%, the volume of Bitcoin trading was only at around 1 million a week. Where a fiat currency system, socialist policies, and overregulation have produced hyperinflation, a completely devalued currency, and food shortages, Bitcoin’s free-market principles have provided Venezuelans with sound money and access to desperately needed food, goods, and medicine.
Until recently, Venezuela has been operating on the Bolivar which is a fiat currency, like the U.S. dollar. Fiat currencies are not backed by any type of commodity such as gold or silver, but by mere faith in the issuing government. Since fiat currencies don’t correlate to a finite amount of gold or silver in reserve, that means that issuing governments can print an infinite amount of paper money. For some, that may sound like a security blanket, but in all reality, it’s a death trap. As Bitcoin founder Satoshi Nakamoto understood “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”
As the government prints more paper money, the money that each citizen or business has loses it’s value. As paper money loses its value, the cost of goods and services begin to cost more, ultimately causing inflation. Given the fact that Venezuela continued to print money like “confetti” as one market commentator remarked, it’s no surprise that the Bolivar lost 99.9% of it’s value in just two years and that the annual rate of inflation is currently at nearly 9,000%.
Read More: https://bittox.com/2018/05/06/venezuela-when-government-failed-bitcoin-prevailed/
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