Venezuela, the South American country famous for its cheap gas (fuel) prices, has experienced a surge in both Bitcoin volume and price. The country is in the middle of the worst economic crisis ever seen in its recent history. According to the Venezuelan consulting firm, EcoanalÃtica, the country’s annualized inflation reached the 1.108% mark.
The Venezuelan government has unofficially banned the country’s central bank (BCV) from releasing economic indicators such as inflation figures and price indexes. After much pressure from banks, consulting firms, and other institutions, the BCV reported an 180.9 percent inflation for last year. Consulting firm, EconoanalÃtica, criticized the methodology used by the BCV to calculate inflation. BCV altered the weight of several goods and services used to “embellish” the figure.
Amidst this grim landscape, bitcoin has gone through highs and lows. In Venezuela Bitcoin and other currencies prices are calculated using the unofficial black market rate. Traditionally, a website named Dolar Today has been used as the country’s market reference. However, its rate has slowly lagged behind. In consequence, many OTC transactions between private financial entities and individuals have ignored the 1,092 VEF/USD rate.
The bitcoin price has gone from 650,000 VEF per bitcoin two weeks ago, to yesterday’s 850,000 VEF/BTC high. This accounts for a 30% increase in less than 2 weeks. Dividing the local bitcoin price with the international one gives us a rate of approximately 1377 VEF/USD, a 22% increase compared to Dolar Today’s rate. The volume has also been consistently making new highs on LocalBitcoins alone, with over 243 bitcoins transacted in the past week.
Economists and consulting firms are predicting an increase in devaluation, inflation, and good’s shortages. If the black market rate continues to increase, the bitcoin price will follow. Only a change in macroeconomic policies will scare away the hyperinflation and bond default ghosts.
