Cryptos as money alternative in hyperinflationary economies

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Avatar for CoquiCoin
2 years ago

One of the criticisms that we usually read from economists who are against cryptocurrencies is that due to their high volatility they are not an alternative to fiat money when it comes to seeing them as a means of payment. And this statement may make some sense if we are talking about economies with stable currencies. But what happens in those economies where the legal tender currency loses value every day or, even worse, what happens when the purchasing power of that currency loses value due to high inflation rates. In those cases, cryptocurrencies are a real source of relief and a great tool to overcome difficulties.

A case example

And to illustrate what I am saying I will speak from my own experience and use as an example my country, Venezuela, which has lived through one of the longest hyperinflations in history.

And here are some figures: Venezuela has been in hyperinflation since the end of 2017. According to the figures accepted by the country's government (so the real ones may be worse), annual inflation in 2020 hovered around 3,000% (130,000% in 2018 and 9,000% in 2019). And although, this year's inflation will surely be lower due to the fact of dollarization of the economy even if not an official one, it won't be lower than 3 digits.

So a big question here, Are BTC or BCH as volatile as they say if compared to a currency that lost its purchase value by 130,000% as happened with the bolivar in 2018. Even 3000% in 2020, is a figure that sends shivers down the spine.

Moreover, for years now the bolivar has been constantly devalued against the dollar. And we have had three monetary reconversions in less than 15 years, where the currency has lost 14 zeros. In this scenario, cryptocurrencies have been more than an alternative to our currency. Especially for an important part of the population that at the beginning of the crisis in 2017, 2018 didn't have access to foreign currency accounts. And in those years there were also government restrictions on obtaining foreign currency and trading with it.

Speaking from my own experience

I started digging into the world of cryptocurrencies at the end of 2015 and in 2018, the worst year of the inflationary crisis in the country, I started using cryptocurrencies to make payments. Since then I have used cryptocurrencies not only as an investment but also to pay for different services. I have paid for restaurant meals, hotel reservations, phone recharges, supermarket purchases, and even medicines. I have seen many people receive remittances from their relatives in cryptocurrencies. And I use them to transfer money to people outside the country. And this year I have had more than one coffee paying with Bitcoin Cash.

And while it is true that a significant portion of people who use cryptocurrencies use them as an investment, for some they are a perfect tool to circumvent the difficulties imposed by the governments of their countries for the mobility of money and to protect themselves from inflation.

In Conclusion

Cryptocurrencies and their volatility can turn many people away because they do not have basic financial knowledge, but certainly, those who are used to living in economies in crisis will see an opportunity in cryptocurrencies. And even if they can suffer drops in value, eventually days later they can recover and even rise in value above what it was previously. And after all, their volatility may seem derisory in the face of the fall in the value of fiat currencies in many countries, as is the case of Venezuela.

For weeks I've wanted to write my entry to participate in the  MythBusting 2021 World Challenge, and between one thing and another I had not done it, but thanks to the extension of the participation period, I am finally writing my article for the contest hosted by @SofiaCBCH. Myth-busting: Cryptos are too volatile to use as money from 2021 road map: Busting small blocker myths about Bitcoin and others.

All images and writing are my own unless otherwise stated.

© CoquiCoin  

My SLP address: simpleledger:qpe8tkd69vratx8zhtw7hn6m55lwz7uqr5xe5zg4dk

My SmartBCH address: 0x5902193651022AeeD83d9C9381802082580788A7

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Avatar for CoquiCoin
2 years ago

Comments

I still have to use crypto to pay services and goods. I have been eyeing a shop here where we can possibly do it but until now I haven't been there. I have to make it one of these days to have something to write about.

Volatile cryptos may be, it's undeniable that it has helped us in many ways.

$ 0.03
2 years ago

Hehe, I hope you do it soon Kuboy.

Yes, they are volatile but we can learn to live with that, and they are definitely helpful in many ways.

$ 0.00
2 years ago

It’s so good that you’re able to pay for services with BCH, there aren’t many places that I can do it in uk, but I’m hoping for more in 2022 💙

$ 0.03
2 years ago

Let's hope for an advance in the adoption of crypto all around us. 💙

$ 0.01
2 years ago

There are some website that we can use for travel booking that I know of and recently Paul told me there is a pub chain that also accepts BCH. Little steps forward ☺️

$ 0.01
2 years ago

That's great! I have used in the past also a website where you can buy travel coupons for booking at hotels.com among a lot of options of gift cards. But they don't accept BCH. The site name is bitrefill

$ 0.01
2 years ago

The one I heard of is Travala if I remember well. I think Paul mentioned he paid for the hotel with USDT or other stable coin.

$ 0.00
2 years ago

Yes, Travala takes cryptos. And speaking of accepting stable coins, there are more and more merchants here that accept them, and there are also many that now accept payments using Binance. So little by little, there are more options.

$ 0.00
2 years ago

Hello, my friend,

I fully agree with you in the arguments you make in favor of the use of crypto despite the volatility.

As a Venezuelan, I understand very well what you expose and how cryptocurrencies have helped many to weather the storm.

In addition, volatility is an issue that originates from the adjustment that the world economy is undergoing, where the interested parties have their hands in.

I think that in the end technology will prevail as always, but unfortunately, as always, few will take advantage of it by subjecting the most naive and unwary.

Perhaps an algorithmic power is a key to the solution, but I have very reasonable reasons to be suspicious of this also.

The biggest of the successes in the contest.

$ 0.03
2 years ago

Thank you very much, friend, for your feedback and for stopping by. History will tell us, and hopefully, there won't be just a few who can take advantage of cryptocurrencies. My best wishes to you for next year.

$ 0.00
2 years ago

Good luck.

$ 0.01
2 years ago

It is a very good point that for people in high inflation areas crypto can indeed be less inflationary than their own currency. It does pose a danger to crypto though. If lots of countries with very unstable economies adopt crypto it could actually make crypto more sensitive to fluctuations as well

$ 0.03
2 years ago

I believe, on the contrary, this is what is needed to advance in favor of adoption, more people using cryptos and fewer people and institutions with economic interests may have the ability to manipulate the market. Thanks for stopping by, and Happy New Year!

$ 0.00
2 years ago

All people will dig about crypto for sure in the future. Just hoping government will never get a chance to get in our way.

$ 0.03
2 years ago

Even if they get it, they can't ban crypto completely. Happy New Year!

$ 0.00
2 years ago

Crypto will gonna rise more this year 2022. Let's claim it!

$ 0.02
2 years ago

Let's hope for that. Happy New Year in advance!

$ 0.00
2 years ago

Crypto is here to stay. To some people, it will be like the rejected stone that turns to be the pillar of the building. Thanks

$ 0.01
2 years ago

Have a wonderful journey in crypto. And thanks for sharing your own experience 🤗

$ 0.02
2 years ago

You are welcome and thank you for stopping by!

$ 0.00
2 years ago

Success my friend!

$ 0.03
2 years ago

Thank you Gertu! :)

$ 0.00
2 years ago

I think it will rise at the beginning of the new year

$ 0.00
2 years ago

Best of luck, amiga!

$ 0.03
2 years ago

Thank you, amiga!

$ 0.00
2 years ago

Right now, we can say that crypto will be the future for sure. Cryptocurrencies in general are said to be useful against inflation of fiat currencies. I feel bad about how your local currency is losing value but I am glad that you are able directly pay with BCH there Eliana!

$ 0.03
2 years ago

I agree with you, Bryan. Cryptos are the future. Happy New Year in advance to you!

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2 years ago

Good luck with your participation in this challenge coqui 💓

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2 years ago

Thank you, Sequoia!

$ 0.00
2 years ago

That's right, thank you for this beautiful picture

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2 years ago

This is quite right.. There are a lot of countries like this and quite frankly many are on the path as well, even if they aren't there yet

$ 0.03
2 years ago

Unfortunately, many countries face big economic problems, but fortunately for their inhabitants, cryptocurrencies can be a great alternative to help them overcome the crisis.

$ 0.00
2 years ago

Good luck 😁

$ 0.03
2 years ago

Thank you, Jane!

$ 0.00
2 years ago