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Cryptocurrency: A New Rising Sun For Weak Currency Countries
Everyone is aware about the term “weak currency” which witnesses its devaluation as compared to other currencies. It is not difficult to identify the weak currency countries undergoing economic crisis. Often such countries show more import than export resulting in more supply than demand of the currency in the international market. A currency’s value is seen in relation with the strength of its economy.
Unlike brexit where Britain’s currency - pound sterling saw a decline, currencies of Venezuela, Turkey, Zimbabwe and Iran have been facing a nosedive in its value. They have seen high inflammations and sharp declines. Under this pressure, citizens of these countries have turned towards cryptocurrencies for rescue. These internet friendly currencies have provided the citizens with stores and mediums of exchange more reliable than their own currencies.
Venezuela has been seeing hyperinflation since 2014. The venezuelan bolivar, its currency saw official inflation rate up to 57.3% in February 2014. Whereas, the real inflation rate skyrocketed to a 100% in September of the same year. During this devaluations, the citizens looked for cryptocurrency to save their assets in. Apart from supporting the economy, cryptocurrency also became the medium through which citizens got access to external aid. People living abroad donated in cryptocurrencies to help domestic NGOs and other organisations buy food and distribute within the country.
However, soon enough, the government launched its own cryptocurrency, Petro. Petro is now known as Venezuelan cryptocurrency backed by country’s oil and mineral reserves. With this launch, previous laws against crypto mining were lifted making the process ‘perfectly legal’. Apart from this the government initiated free lessons about cryptocurrency for the citizens.
With economic conditions still going down, more and more businesses turn towards cryptocurrency as their savior in Venezuela. It is said that in the near future cryptocurrency trading
will see a wider consumer surpassing the original 60% of the population.
The inflation rate of Turkish lira (TRY) went up to 11.9% in October 2017. With this jerk, the turkish citizens turned towards crypto for the rescue. Initially, the volume was not significantly large. Only 41 bitcoins were traded by November 4, 2017 in exchange of Turkish lira.
This exemplified that inflation in a currency shows an opening for cryptocurrency. However, without a hyperinflation, the country does not show a dramatic increase.
With time, the Turkish population sensed the threat of hyperinflation with inflation rising to 15.39% in the beginning of July. This resulted in 131.9% increase in the crypto volume within the country.
Looking at the inflation and devaluation of Turkish lira and increased preference to bitcoin, Erik Voorhees, CEO of ShapeShift twitted:
“We’ve entered a time now where some fiats are far less stable than Bitcoin. Turkish lira plummeting ~20% in one day.”
The stats released by ING Bank after a survey in June 2018 revealed more and more people agreed with Erik. According to the stats, Turkey has the highest rate of cryptocurrency ownership making almost 18% people owning some kind of cryptocurrency.
For countries like Turkey that live under dominance of dollar, cryptocurrency is a gateway that ensures their freedom.
Zimbabwe has faced economic crisis for a long time. It has witnessed a hyperinflation for almost 10 years with its rate reaching at 231,000,000% in July 2008. Seeing this, Zimbabwe deserted its own national currency, the Zimbabwean dollar when a trillion dollar note was introduced.
Witnessing the downfall, the government allowed the citizens to use various currencies within the country. But this showed its own complications like shortage of foreign notes in the country. To get the situation under control, Government imposed more and more capital controls.
Like other weak currency countries, Zimbabwe also turned towards the budding digital currency. A Zimbabwean crypto-exchange, Golix showed a major increase in its customer list. The reason for this turned out to be the citizens seeking a currency away from government's regulations. With the increasing inflation, Golix saw its monthly trade skyrocketing up to a million dollars.
However, unlike the other two countries, Zimbabwean government turned against the concept of using crypto industry as a way out. This in turn resulted as a turn away from the country's brighter days. The government did not only missed out an opportunity to stabilize the situation, but also lost a chance of tax evasion.
This points towards the great growth and potential of crypto industry in the global economy. Despite the fluctuations and certain instabilities, cryptocurrency holds its value as a saviour for citizens of these countries. Such mass adoption of crypto and its rise within the weak currency countries is enough to clear the bad reputation set by some economists.
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