Is Latin America the next great Bitcoin frontier? Localbitcoins data might suggest so
Despite an overall bearish year for cryptocurrencies in 2018, demand is soaring in countries where failing economies and socio-economic instability have led to distrust in centralized government and unstable fiat currencies.
Take the example of Latin America. A group of nations that have historically gone through chaotic dictatorships and military rule as well as frequent economic instability. With the relatively recent transformation from dictatorship to democracy in many Latin American countries from the 1980´s and 90´s, there has remained a general distrust of executive power, on both sides of the political spectrum.
While many would say that Latin America´s transition to democracy seems well established, one of the biggest threats to security in countries such as Argentina, Venezuela, Colombia, Peru and Chile is economic in nature.
With a highly volatile economy, and a government that is struggling to provide basic priorities such as macroeconomic stability, Venezuela is perhaps one of the clearest examples of how hyperinflation combined with other social and political problems can lead to citizens looking towards decentralized currency alternatives.
On the back of a five-year recession, which has seen Venezuela struggle to stabilize its native currency- the Bolivar, Venezuela is the very first country to develop a government-backed coin- the petro or petromoneda- which launched in February 2018.
The South American country of Venezuela has looked to cryptocurrency as a way to supplement the plummeting Bolivar, with the petro supposedly backed by the country´s oil and mineral reserves. As of yet, there has been little positive response from cryptocurrency community and most other economies have regarded the petro as fraudulent in nature.
Nonetheless, the petro aside, there has been a huge surge in the trading volume of cryptocurrency by Venezuelans who are seeking security in other (stable) coins. As a result of fearful citizens looking to a decentralized alternative to the Bolivar and the petro, there has been an influx in trade on Localbitcoins, a peer-to-peer site where people can buy and sell bitcoins from each other directly. To put this in perspective, Venezuelan investment in Bitcoin since October 2018 has reached over 19 million dollars (1.25 billion bolivars) and considering the general plummet in volume globally, is an exciting indication of new growth.
This circumnavigation of centralized economies has also taken hold across other Latin American countries with economies in crisis. Argentina, for example, a country that has famously suffered from hyperinflation following its economic recession in 1998 and which has struggled to stabilize since, has also seen an increase in LocalBitcoins trading and led to the development of Argentina as a breeding ground for crypto growth.
Other Latin American countries such as Colombia have followed their neighbors in Venezuela and Argentina and are heavily investing in Bitcoin. Colombia saw an all-time high in trading in November of 2018 with a volume of 8 billion (Colombian peso) being reached. Colombian president Iván Duque has even promised to cut rent taxes on crypto firms.
Even countries with comparatively stable economies are catching on to the bitcoin frenzy in Latin America. Peru and Chile are great examples of this, with both countries having seen record Bitcoin trading volume and an increase in LocalBitcoins trading. Evidence to suggest that the trend that is sweeping across Latin America will only continue to spread to other economies.
While other nations struggle to move ahead in the area of cryptocurrency, Latin America has introduced cryptocurrency to its masses. Seen by many as an alternative to failing paper currency and exacerbated by the distrust that many Latin American people have in their flawed institutions, the phenomenon that is sweeping across the Latin American nation is indicative of a possible cryptocurrency-based economy in the not too distant future.