The state of Venezuela's economy is in a shambles as its currency, the bolivar (Bs), has devalued close to 95 percent against the US dollar or in other words the dollar has risen around 2000 percent versus Bs, since the start of 2017.
Hyperinflation has struck the country hard and it is on track to face a currency crisis similar to that in Germany during the 1920s and the more recent one in Zimbabwe.
As of August 4, Venezuela's annual inflation rate stood at 1728 percent. The value of the currency is in a free fall and now it's worth less than the fake gold in the video game World of Warcraft.One Twitter user named 'Kaleb' who claims to be a Venezuelan citizen pointed this on July 14.
It happened again, WoW gold is worth more than the Venezuelan Bolivar.
Black Market: Bs.F 8493.97 per USD
WoW Token: ~8385g per USD. pic.twitter.com/Il7TVqYNsH— Kaleb (@KalebPrime) July 14, 2017
Instead of counting notes, people had started weighing piles of cash to make payments since last year, now with this sudden spike in devaluation using the paper currency will even more troublesome.
So what led to this situation in the country? A multitude of reasons are behind the economic downfall of Venezuela.
The fall in crude oil prices has hurt exports, strict currency controls and the rise of corruption under President Nicolas Maduro are a few reasons experts list as the causes of hyperinflation.
But recently the bolivar saw a sharp downfall after the US announced sanctions against the country when Maduro got re-elected as the President in what political experts call a 'sham election'.
Post the announcement of the controversial election result announcement, the bolivar touched historic lows against the US dollar as per the website DolarToday. In a matter of 6 days it depreciated around 80 percent to levels of 18,900 against the US dollar.
The data given by DolarToday reflects the country's black market exchange rate. This rate of exchange gives a better picture of the ground reality in Venezuela and is taken for reference by firms across the world as the government fails to provide factually correct economic data.
These are tough times from Venezuelans, who are finding it hard to feed their families and take care of their old.
In these troubled times, some citizens have found shelter in bitcoin as an alternate currency. The world's first decentralized and deregulated cryptocurrency has served as a safe haven for a few in the country.
As one Reddit user explains the plight of his/her countrymen, he/she is grateful to bitcoin and says, "Bitcoin is literally saving my family from hunger and giving them the financial freedom to immigrate in the near future. My parents and sister live in Venezuela."
Being inflation proof, bitcoins have proven to be a better store of value compared to the bolivar and people are converting their fiat currency to bitcoin in order to escape the free fall of currency devaluation.
This trend is visible with the rise of bitcoin adoption in the country.
Though the bitcoin trading is negligible in Venezuela as compared to other nations like US and Japan but trading volume has seen a sharp upmove in the past 2-3 years.
Some are even using bitcoin to buy day-to-day items from outlets that accept cryptocurrencies in various countries, which then get delivered to Venezuela.
Another way-through people have found is buying Amazon and eBay gift cards from a site called eGifter using bitcoins.
Trading volumes on LocalBitcoins -- an online classifieds page for bitcoin buyers and sellers -- have spiked recently to as high as 447 bitcoins a week, worth about USD 1519800 as per the cryptocurrency's current price.
The fact that bitcoin is not under the control of any central authority scares central banks and governments but by being decentralized, it tackles the issue of currency manipulation or mismanagement which arises due to trusted third parties.
It is this nature of bitcoin that makes it a contender for an alternate currency in countries like Zimbabwe and Venezuela, where people feel they have been betrayed by their governments.
Best summarized by the Redditor mentioned above, "Bitcoin can give anyone the ability to trade freely and protect themselves financially against corrupt and incompetent governments."
"In a world of 6 billion people, most of whom have no access or are ineligible for basic banking services and an increasing number of governments opposing free speech and basic human rights, bitcoin might not be the perfect hero we want, but it's what we need," the user adds.Follow @shukla_05sid