Cryptos as money alternative in hyperinflationary economies

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