According to Google’s currency convertor, 1 Satoshi now equals nearly 6 Venezuelan Bolivares Fuertes (VEF). A Satoshi is 1/100 millionth of a Bitcoin (0.00000001), and is the smallest possible unit for the cryptocurrency.
It is remarkable that a Satoshi far exceeds the value of a VEF, and is a good indicator of just how extreme hyper-inflation has gotten in the South American nation. A Satoshi is not a lot of money, only equivalent to 0.000075 USD. One USD is equivalent to a whopping 80,000 VEF, which is quite close to the largest denomination VEF banknote of 100,000.
The economic crisis in Venezuela started under the reign of Hugo Chavez due to overspending and price controls, and drastically deepened in 2014 when the price of oil collapsed since most of Venezuela’s income was from oil drilling.
In order to balance overspending and debts, the government of Venezuela began printing VEF at will, leading to a rapid rise in inflation starting in 2012. By late 2014 the currency lost over 90% of its value, sending the economy into a tailspin as citizens lost their life savings. This is one of the problems Bitcoin was made to solve, since it is decentralized and can’t be printed at will like governments so often do with their local fiat currencies. This characteristic of Bitcoin conserves its monetary value and makes it safer than most fiat currencies in the world.
Inflation rates have been increasing in Venezuela ever since the crisis started in 2012, now exceeding 7,000% annually and on track to reach 13,000% this year according to the United States Department of Labor Statistics. The end result is people using wheelbarrows full of cash to go grocery shopping.
The Venezuelan Bolivar Fuerte is obviously near the point of total collapse and could end up going the way of the Zimbabwean Dollar which was abandoned and became completely worthless in 2015. In Zimbabwe, citizens sought out other currencies to use for their money, mainly the USD, but Bitcoin has become another popular monetary refuge.
Indeed, this past year Bitcoin trading volume in Venezuela has skyrocketed on Localbitcoins, which is a peer to peer Bitcoin trading website. Over 3.9 trillion Bolivares Fuertes were traded for Bitcoin last week on the website, and of course, this doesn’t include all the other Bitcoin transactions outside of the website. Clearly, Venezuelans are moving their money into Bitcoin more so than ever before.
Bitcoin is in a good position to become a primary currency for desperate Venezuelans who have been tortured by years of hyperinflation. While Bitcoin can be quite volatile and sometimes drops overnight, Venezuelans will rest a lot easier at night knowing their money is in Bitcoin since it does not drop each and every night with the consistency or magnitude that the VEF does, and in the long-term Bitcoin has been going up.
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