This latest 9-month bear market has brought out the uglier side of human nature, as competing factions within the crypto community hurl accusations and insults at one another on social media with increasing vitriol. During these tense times, it is easy to zoom into the petty squabbles and lose sight of the majestic vista of opportunity that lies ahead for cryptocurrencies. While cryptocurrencies could be viewed as a luxury for those of us in stable democracies with well-functioning legacy financial systems, Bitcoin could mean the difference between survival and starvation for citizens of hyperinflationary economies.
When Satoshi released his whitepaper detailing his peer-to-peer electronic cash system at the tail-end of 2008, he could not have predicted that in its first decade of existence, Bitcoin would become a flotation device for many people drowning under hyperinflation in failing economies the world over. In Venezuela, years of economic mismanagement by Maduro’s socialist government coupled with incessant currency printing has dragged the country into severe hyperinflation, culminating in 95% devaluation of the Venezuelan bolivar. Tight capital controls in place since 2003 limited citizen’s ability to exchange their bolivars for foreign currencies, leading many in the country to look to cryptocurrencies as their choice store of value. Although the country released an oil-backed cryptocurrency, the Petro, its centralized nature leaves it vulnerable to the same financial malfeasance which destroyed the bolivar. Since the currency devaluation came into effect on August 18 of this year, a total of 4905 Bitcoin worth approximately $32million were brought and sold in the Latin American country with the month of September representing the highest bitcoin volume traded on record.
Suffering under the weight of reimposed US sanctions, the Islamic Republic of Iran is also increasingly turning to bitcoin as a way of circumventing the US-led global financial system. Demand for the cryptocurrency has pushed the price of a single bitcoin over $22,000 in Iran, representing a 350% premium to the price quoted on Western exchanges. Similarly, Zimbabweans looking to escape their own hyperinflationary currency by holding bitcoin would need to part with $12,000 for a single coin, 180% more than their counterparts in developed countries.
It is hard for those living in stable democracies such as the United States, Canada and the UK to imagine bitcoin superseding traditional fiat monies. Yet for many millions living in developing, unstable economies having a currency that is not subject to the political whims of despotic dictators can provide a lifeline for them and their families. All of us working to lay the pipelines of a decentralized financial system best remember that real livelihoods are at stake.